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Are you contemplating investing in real estate? But you don’t have enough money to do this. In this article is a tip you are able to 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 best wager is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be happy to help you out! There are some variations that can be used depending on you and your vendor. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you cannot 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 second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money sit in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term draws to a close 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 in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually 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 don’t care what kind of revenue you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can 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 good that seller and buyer may work together. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.