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Are you thinking of investing in property? However, you do not have enough money to accomplish this. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are several variations that may be used depending upon you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments 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 – 2 or three years. Rather than having the money sit down in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or you can sell. Unless you struck a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually 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 property if you default, they do not care what sort of revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire 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 versatility on their part.