You have a new tenant who just moved in or you recently sold one of your properties to a new client. While giving clients an affordable, comfortable place to call… more
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Are you thinking of investing in property? However, you do not have enough money to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better gamble 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 considering using this strategy perhaps your landlord would be glad to assist you! There are several variations that can be used depending upon you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 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 frame – two or three years. Instead of having the money sit in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual 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 may still be scared there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually 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 land if you default, they don’t care what sort of revenue you make. Complete the deal with a second 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 entire picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.