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Are you contemplating investing in real estate? However, you do not have enough money to do this. In this article is a tip you can 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 very best guess is to find a land that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be glad to help you out! There are some variations that could be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments 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 3 years. Instead of having the money stay 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 draws to a close you should be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still shy away there are a lot of financial lenders that would wish 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 know they get their money back in the value of the property if you default, they do not care what sort of revenue you make. Conclude the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.