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Are you contemplating investing in real estate? However you don’t have enough cash to do this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be glad to help you out! There are a few variations that may be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume 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 obligations while the property stays in the seller’s name.
You take over the first mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than having the money sit down in a bank they could be collecting 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 need to be able to refinance the cost, or perhaps you could sell. Unless you struck a genuine 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 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 land, 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. Conclude the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.