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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 may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better gamble is to find a land that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are a few variations that can be used depending upon you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations 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 house 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 collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or you could sell. Unless you struck a real bad market the value of the home should have risen by then.
Most 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 like 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 sort of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.