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Are you thinking of investing in property? But you do not have enough money to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be happy to assist you! There are several variations that could be used depending on you and your vendor. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may 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 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money stay in a bank they could be getting 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 need to be able to refinance the cost, or else you could sell. Unless you hit a real bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they don’t care what sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the entire picture. It is good 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 asking price with a little versatility on their part.