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Are you contemplating investing in real estate? But you don’t have enough money to do this. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to find a property that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be glad to assist you! There are a few variations that can be used depending upon you and your owner. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money stay in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still shy away there are lots of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they do not care what sort of income you make. Conclude the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.