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Are you thinking of investing in real estate? But you do not have enough cash to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this technique perhaps your landlord would be glad to assist you! There are a few variations that could be used depending on you and your owner. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 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 property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Instead of having the money sit down in a bank they could 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 ought to be able to refinance the cost, or else you can sell. Unless you strike a real bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of income 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, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.