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Are you thinking of investing in real estate? However, you don’t have enough money to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better wager is to find a land that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be happy to help you out! There are a few variations that could be used depending upon you and your owner. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps 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 first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and create 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 3 years. Rather than having the money sit in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the estate if you default, they do not care what sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.