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Are you thinking of investing in property? However you don’t have enough cash to do this. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps the owner would be glad to assist you! There are several variations that can be used depending upon you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well 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 make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 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 else you could sell. Unless you strike a genuine bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the land, 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 kind of money you make. Complete the deal with a 2nd mortgage done 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 whole picture. It is better that seller and buyer may work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.