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Are you thinking of investing in real estate? However you do not have enough money to accomplish this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to locate a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps the owner would be happy to assist you! There are several variations that could be used depending on you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first 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 period – 2 or 3 years. Rather than having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or else you could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still shy away there are a lot 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 don’t care what kind of income you make. Conclude the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole 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 could still give them their initial price with a little overall flexibility on their part.