Behind the Scenes: Commercial Real Estate Conversion

Source: https://thinkrealty.com/behind-the-scenes-commercial-real-estate-conversion/

This sign shows the building as it was whenCrestCore Realty purchased it.

PROJECT BREAKDOWN

Purchased: July 2015

Opening Date: January 2017

Investment: Just under $2 million

Payoff:

+ Corporate campus bringing 65 full-tim…

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Are you contemplating investing in real estate? But you do not have enough cash 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 along.

To be fair, not every seller will be interested (or even understand) the concept outlined. Your better wager is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or frustration with tenants.

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

The simplest method 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 could also try a ‘subject to’ assumption where you merely make obligations while the property remains 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 period – 2 or three years. Instead of having the money sit down in a bank they could 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 ends you ought to be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the home 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 scared there are plenty of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is mostly 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 estate if you default, they don’t care what sort of income 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, paying down 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 can still give them their initial price with a little versatility on their part.

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