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Are you contemplating investing in property? However, you don’t have enough cash to accomplish this. In this article 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 willing (or even understand) the concept outlined. Your very best wager is to locate 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 are currently renting and thinking of using this strategy perhaps your landlord would be glad to help you out! There are some variations that can 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 – 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 original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the original mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money sit in a bank they can be getting 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 ought to be able to refinance the cost, or you could sell. Unless you strike a real bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would wish 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 property if you default, they do not care what kind of money you make. Complete the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.