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Are you thinking of investing in real estate? But you don’t have enough money to accomplish this. In this article is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be happy to help you out! There are a few variations that could be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may 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 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. Instead of having the money sit 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 ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you strike an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared there are plenty of financial lenders that would wish to make a deal. Financiers like 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 estate if you default, they do not care what sort of revenue you make. Conclude the deal with a second mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.