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Are you thinking of investing in real estate? But you don’t have enough money to do this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better wager is to locate a land that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps the owner would be glad to assist you! There are some variations that can be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume 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 remains in the seller’s name.
You take over the original mortgage and make a second 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 could be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or you can sell. Unless you struck a real bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers like real estate. 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 estate if you default, they do not care what kind of income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work hand in hand. 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.