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Are you thinking of investing in real estate? However, you do not have enough cash to do so. Right here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best gamble is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are a few variations that can be used depending on you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume 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 remains in the seller’s name.
You take over the original mortgage and get a 2nd 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. Instead of having the money sit down 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 investment term.
When the term ceases you ought to be able to refinance the cost, or else you can sell. Unless you hit a real bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still be scared there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the entire 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 versatility on their part.