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Are you contemplating investing in property? However, you don’t have enough cash to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be happy to help you out! There are some variations that may be used depending on you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit 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 ends you need to be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they do not care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.