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Are you thinking of investing in real estate? However, you don’t have enough money to do this. Here is a tip you can use as long as the property seller is willing to negotiate along.
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 desire for selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and considering using this approach perhaps the owner would be happy to help you out! There are a few variations that can be used depending on you and your owner. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original 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 period – 2 or 3 years. Rather than having the money stay in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or you can sell. Unless you struck an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely need to make a good 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 like real estate. The mortgage is mostly around 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 don’t care what kind of income you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.