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Are you thinking of investing in real estate? But you do not have enough money to do so. In this article 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 willing (or even understand) the concept outlined. Your better wager is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and considering using this approach perhaps your landlord would be happy to assist you! There are some variations that can be used depending on you and your owner. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well 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 property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money stay in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or else you could sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.