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Are you thinking of investing in real estate? However you don’t have enough cash to do this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are a few variations that could be used depending on you and your owner. Do they want the market price or are they just eager 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 initial 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 payments while the property remains in the seller’s name.
You take over the original mortgage and make a second 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. Rather than having the money stay 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 term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are lots of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is mostly 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 do not care what kind of income you make. Conclude the deal with a second mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire 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 initial price with a little versatility on their part.