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Are you contemplating investing in real estate? But you do not have enough cash to do this. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps the owner would be glad to help you out! There are several variations that could be used depending on you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have 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 payments while the property stays in the seller’s name.
You take over the first mortgage and make 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 three years. Rather than having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually 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 sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, paying off 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 can still give them their initial price with a little versatility on their part.