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Are you contemplating investing in real estate? However, you don’t 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 with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best guess is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are several variations that may be used depending upon you and your vendor. Do they need the market price or are they just desperate to get out from 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 can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original 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 – 2 or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or you could sell. Unless you strike a genuine bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the land, 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 revenue you make. Complete the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.