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Are you contemplating investing in real estate? However you don’t have enough money to do this. Here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be happy to assist you! There are several variations that can be used depending on you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and create 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 three years. Rather than having the money sit in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the estate if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.