The Advantages of “Middle Market” Commercial Real Estate

Source: https://thinkrealty.com/the-advantages-of-middle-market-commercial-real-estate/

Everyone likes a trophy, and glamorous properties in big cities have certainly benefited from the recent strong real estate market. But much less attention has been paid to the resurgence of “middle market” commercial properties. We’ll explore here the opportunities offered by smaller-value transactions in areas not considered “gateway” markets.

Less a Trophy, More a Workhorse

The perception that some real estate markets may be over-valued has been driven, in part, by the app…

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Are you contemplating investing in real estate? However, you don’t have enough cash to do this. Here is a tip you may use as long as the property seller is willing to negotiate with you.

To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.

Actually, if you maybe currently renting and considering using this approach perhaps your landlord would be happy to help you out! There are a few variations that may be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?

The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also 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 get a 2nd mortgage on the remaining cost of the house 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 can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment 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 house should have risen by then.

A lot of mortgage lenders merely want 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 around 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they do not care what kind of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.

Now you can observe the whole picture. It is good that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.

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