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Are you contemplating investing in real estate? But you don’t have enough cash to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps your landlord would be glad to assist you! There are some variations that may be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and make 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 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you should 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 by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of income you make. Conclude the deal with a 2nd mortgage done 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 see the complete picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.