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Are you contemplating investing in real estate? But 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 with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this approach perhaps the owner would be happy to help you out! There are a few variations that may be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may 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 create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit in a bank they can 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 ceases you ought to be able to refinance the cost, or you can sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are plenty 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 property, so as long as they know they get their money back in the value of the estate if you default, they do not care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work together. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.