The Southern California market, like the entire California real estate market, is hot for investments at the moment. Both the traditional and the Airbnb rental strategies can be very lucrative because of the factors driving the local economy. People are both moving to Southern California for the long run and visiting as tourists or business travelers.
The Affordability Factor
Affordability is a major concern in the Southern California real estate market because property prices are quit…
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Are you thinking of investing in real estate? However you don’t have enough cash to accomplish this. Right here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to locate a property that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be happy to help you out! There are some variations that may be used depending upon you and your owner. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – 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 as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and get 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 sit in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots of financial lenders that would wish 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 understand they get their money back in the value of the land if you default, they don’t care what kind of income you make. Conclude the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.