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Are you thinking of investing in property? However, you don’t have enough money to do so. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this technique perhaps the owner would be glad to assist you! There are some variations that can be used depending on you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three 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 draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a real bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. 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 property if you default, they do not care what kind of revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.