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Are you thinking of investing in real estate? However you don’t have enough money to do so. Here 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 willing (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be glad to help you out! There are a few variations that may 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 – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume 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 obligations while the property stays 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 frame – 2 or three years. Instead of having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you ought to be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is usually 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 don’t care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.