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Are you contemplating investing in real estate? However, you don’t have enough cash to do so. Here is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best guess is to find a land that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be glad to assist you! There are several variations that may be used depending upon you and your owner. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well 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 make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the house should have risen by then.
Most 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 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 property if you default, they don’t care what kind of revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.