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Are you thinking of investing in real estate? However, you don’t have enough cash to do so. Here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best wager is to find a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be glad to help you out! There are several variations that can be used depending on you and your seller. 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 obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well 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 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 three years. Instead of having the money sit in a bank they can 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 ceases you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the property, 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 revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.