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Are you thinking of investing in real estate? However you do not have enough cash to do this. 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 interested (or even understand) the concept outlined. Your best wager is to locate a property that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be happy to help you out! There are several variations that can 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 – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money sit down 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 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 home 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 scared there are plenty of financial lenders that would want 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 estate if you default, they do not care what sort of revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the whole picture. It is good 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 initial price with a little overall flexibility on their part.