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Are you contemplating investing in real estate? However, you do not have enough cash to do so. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (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 they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be happy to help you out! There are some variations that may be used depending upon you and your vendor. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest way 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 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 3 years. Instead of having the money stay in a bank they could be collecting a high interest over 2 or 3 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 you can sell. Unless you struck a genuine bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they do not care what kind of income you make. Complete the deal with a second mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.