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Are you contemplating investing in property? But you do not have enough cash to do this. In this article 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 willing (or even understand) the concept outlined. Your very best gamble is to locate a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to help you out! There are some variations that could 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 simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial 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 get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Instead of having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the remainder 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 could sell. Unless you strike an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still be scared there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is mostly 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 property if you default, they don’t care what sort of income you make. Conclude the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.