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Are you contemplating investing in real estate? However you don’t have enough cash to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking of using this approach perhaps the owner would be glad to assist you! There are several variations that can be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you cannot 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 first mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money stay in a bank they can 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 ceases you should be able to refinance the cost, or you can sell. Unless you strike 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 could still be lacking confidence there are lots of financial lenders that would want to make a deal. Financiers like property investing. 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 land if you default, they do not care what kind of income you make. Complete the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work hand in hand. 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.