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Are you thinking of investing in real estate? However you don’t have enough cash to do this. In this article is a tip you are able to use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to find a land that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are a few variations that could be used depending on you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well 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 2nd 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 collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you could sell. Unless you strike a real 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 plenty of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they do not care what kind of income you make. Conclude the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.