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Are you contemplating investing in real estate? But you do not have enough cash to accomplish this. 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 every seller will be willing (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be happy to help you out! There are several variations that could be used depending upon you and your owner. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original 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 original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you strike a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of money you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the entire 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 overall flexibility on their part.