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Are you contemplating investing in real estate? However, you do not have enough money to accomplish 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 every seller will be interested (or even understand) the concept outlined. Your better wager is to locate a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be happy to assist you! There are some variations that could be used depending upon you and your seller. 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 take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could 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 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 three years. Instead of having the money stay in a bank they could 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 draws to a close you should be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still shy away there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is mostly around 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 kind of money you make. Conclude 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 observe the entire picture. It is better that seller and buyer may 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.