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Are you contemplating investing in real estate? However, you don’t have enough cash to do this. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great interest in selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are some variations that could be used depending upon you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot 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 create 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. Instead of having the money stay in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ceases you ought to be able to refinance the cost, or else you could sell. Unless you hit an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the property, 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 kind of money you make. Complete the deal with a second mortgage done with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.