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Are you thinking of investing in real estate? But you do not have enough money to do so. Here is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to find a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are a few variations that may be used depending on you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments 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 frame – two or 3 years. Instead of having the money sit down in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or perhaps you can sell. Unless you hit a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would wish 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 understand they get their money back in the value of the land if you default, they don’t care what kind of revenue you make. Complete the deal with a second mortgage created with the seller. If 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 entire picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.