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Are you contemplating investing in real estate? However you do not have enough money to do this. Right here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are several variations that can be used depending on you and your owner. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could 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 house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money sit 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 ceases you ought to be able to refinance the cost, or you could sell. Unless you hit an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are lots of financial lenders that would wish 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 know they get their money back in the value of the property 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 could still foreclose on the property and sell it, paying down 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 could still give them their initial price with a little overall flexibility on their part.