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Are you contemplating investing in real estate? However, you do not have enough money to do 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 all sellers will be willing (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to assist you! There are some variations that could be used depending on 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 easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments 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 property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Instead of 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 ends you ought to be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the home 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 like to make a deal. Financiers like real estate. 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 land if you default, they do not care what sort of revenue you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete 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 can still give them their initial price with a little overall flexibility on their part.