We’ve all heard or been told to live by the mantra of never looking back, that the past is leave it behind you and continue to move forward. I’ll admit,… more
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Are you contemplating investing in real estate? But you do not have enough money to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be glad to assist you! There are several variations that could be used depending upon you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have 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 payments while the property remains in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Instead of having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or perhaps you could sell. Unless you strike a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the estate if you default, they do not care what sort of income you make. Complete the deal with a 2nd 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 observe the entire picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.