The Promise and Pitfalls of Accessory Dwelling Units as an Affordable Housing Panacea

Source: https://thinkrealty.com/the-promise-and-pitfalls-of-accessory-dwelling-units-as-an-affordable-housing-panacea/

Apaucity of affordable housing that threatens to inflame a burgeoning homelessness crisis and trigger an exodus of well-paying jobs is forcing local governments to consider creative solutions to this intractable problem.

One such solution is to streamline the development of accessory dwelling units (ADUs) in the hopes that real estate developers and single-family homeowners can create more affordable housing inventory one granny flat at a time.

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Are you contemplating investing in property? However, you do not have enough money to accomplish this. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate with you.

To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with the people renting the place.

Actually, if you maybe currently renting and thinking about using this technique perhaps your landlord would be glad to assist you! There are several variations that can be used depending on you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?

The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.

You take over the original mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the term.

When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the home should have risen in that time.

Most mortgage lenders merely want to make a good investment. While your local bank may still be scared there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they don’t care what sort of revenue you make. Complete the deal with a second mortgage done 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 complete picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.

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