Case Study: Moving from Single-family to Self-storage Investments

Source: https://thinkrealty.com/case-study-moving-from-single-family-to-self-storage-investments/

Long before John Manes and Robby Dunn launched Pinnacle Storage Properties and eventually partnered with Erik Osterhus, they both owned single-family and multi-unit real estate investments. Like many novice investors, they spent a great deal of time fixing toilets, rehabbing units, cleaning carpets, and investing time, energy and effort into working in their business. The work was rewarding, but all three found the hours long and hard.

Eventually, Manes, Dunn, and Osterh…

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Are you thinking of investing in real estate? But you do not have enough cash to do this. Right here is a tip you are able to use as long as the property seller is willing to negotiate along.

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

Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to help you out! There are some variations that could be used depending upon you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?

The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could 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 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 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 remainder due in full at the end of the term.

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

Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are plenty of financial lenders that would wish to make a deal. Financiers prefare 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 money you make. Complete the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.

Now you can see the complete picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.

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