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Are you thinking of investing in property? But you don’t have enough money to do so. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be happy to help you out! There are some variations that could be used depending upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – 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 may also 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 make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit down in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or you can sell. Unless you strike a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually around 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 don’t care what kind of revenue you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.