Value-Add Multifamily Deal Screening Checklist for Passive Real Estate Investors

Source: http://astudentoftherealestategame.com/value-add-multifamily-deal-screening-checklist-for-passive-real-estate-investors/

Passive investing in private real estate deals remains one of the best investment opportunities for long-term focused investors. Until recently, these deals were accessed through closed networks and executed entirely on a trust basis.

As these deals have become more …

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Are you thinking of investing in real estate? But you do not have enough cash to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.

To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the folks renting the property.

Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be happy to help you out! There are some variations that could be used depending on you and your owner. Do they desire the market price or are they just eager to get out from 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 initial 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 repayments while the property stays in the seller’s name.

You take over the original mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money sit in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.

When the term ceases you ought to be able to refinance the cost, or you could sell. Unless you strike a genuine bad market the value of the property should have risen in that time.

A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would want 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 know they get their money back in the value of the land if you default, they don’t 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 could still give them their initial price with a little overall flexibility on their part.

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