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Are you thinking of investing in real estate? But you don’t have enough cash to do this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be happy to help you out! There are several variations that could be used depending on you and your seller. Do they need the market price or are they just desperate to get out from 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 first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original 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 sit down in a bank they can 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 ends you need to be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away 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 estate if you default, they do not care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.