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Are you thinking of investing in real estate? But you don’t have enough cash to accomplish this. Right here 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 willing (or even understand) the concept outlined. Your better gamble is to find a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to help you out! There are several variations that may be used depending on you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property stays 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 – two or 3 years. Instead of having the money sit 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 ought to be able to refinance the cost, or you can sell. Unless you struck an actual 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 may still be lacking confidence there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually based on 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 sort of money you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.