Major Mistakes Long Term Real Estate Investors Make

Source: https://realestateblog.reiclub.com/mistakes-long-term-real-estate-investors-make/

Real estate has long been one of the great wealth creation vehicles in the U.S. Despite the seemingly endless success stories, real estate investing is not a simple get rich scheme. It’s a risky endeavor that has the potential to make, or break, an investor. It requires many hours of research, planning, negotiations and physical effort. […]…

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

To be fair, not every seller will be interested (or even understand) the concept outlined. Your better guess is to find a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the people renting the place.

Actually, if you maybe currently renting and considering using this technique perhaps the owner would be happy to assist you! There are some variations that can be used depending upon you and your owner. 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 consider taking over their mortgage repayments – 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 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 make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit down in a bank they can be collecting a high interest over 2 or 3 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 could sell. Unless you strike a genuine bad market the value of the home should have risen in that time.

A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence 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 estate if you default, they do not care what sort of income you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.

Now you can observe the entire picture. It is good that seller and buyer can work together. In the event that 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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