It was a hot and steamy south Miami afternoon in 2004, and I was working as a driving instructor for the Richard Petty Driving Experience. It was tough. We worked… more
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Are you contemplating investing in property? However, you don’t have enough money to do so. Here is a tip you can 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 best wager is to find a property that the owner has great interest in offering it, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be glad to assist you! There are a few variations that can be used depending on you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you cannot 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 original mortgage and get 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. Rather than having the money sit in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or perhaps 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 could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is mostly 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 property if you default, they do not care what kind of income 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, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.