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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 are able to 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 very best wager is to locate a property 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 considering using this strategy perhaps the owner would be glad to assist you! There are some variations that can be used depending upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t 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 create 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. Rather than having the money sit down in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you struck an actual bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly 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 do not care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.