The real estate market has finally returned to some semblance of normality - and those in the market for a home in the Melbourne area have a lot more properties to choose from than before. To a real estate investor, this sounds like a gold mine - however, if you already own multiple properties, you may need to employ some creative financing methods to be able to snatch up these newly available properties.
Of course, if you are a fixer-upper "flipper" with two or more properties already owned, you may already understand how to finance all of your future acquisitions with part of the proceeds from the sale of your currently owned properties, so that after your first property or two you never need to lay out any new cash or get financing again. But what if you are a real estate investor who buys properties to rent them out, or you have not reached the point in your flipping business where you can finance everything with sales proceeds?
Any investor in real estate is well aware of the need to get the best deal on the purchase that you can; however, the financing offered by banks is not always so conducive to this. Banks can also work slowly, which is death to the real estate investor.
One good option for creative financing of real estate investments is assuming a loan. This entails simply taking on the loan payments of the current owner. However, for this strategy to work for you, the property in question must have been originally financed with a low interest loan but currently have a high market value.
This is a technique which you should use only if the mortgage held by the current owner has an interest rate which is lower than the current prime interest rate. Additionally, you have to be certain that the loan agreement does not contain a "due on sale" clause.
Another great creative financing strategy option for investors is the lease option. This can save an investor a great deal of money. A lease option, simply put, is like a futures option in the stock market. Think of it as a "rent-to-own" arrangement, but with a deadline. You pay only a very small amount up front to the current owner - this is not refundable, much like an options premium on the stock market. You have then bought the right to rent out the property as well as the right to sell the property on or before the expiration date of your contract.
If you sign on to an agreement such as this, you should be certain that you have a "Full Right of Assignment" clause included in the contract. This will allow you to sell this property without any further consent form the current owner of the property. Such agreements also carry the stipulation that the owner must, upon request, sell you the property at a previously agreed upon price at any time before the expiration of the contract. You can cancel this contract at any time, but you will of course lose the premium by doing so as well as any rent you have received to date.
By thinking outside of the box, you can do very well in real estate investment. It is important to keep in mind your current situation, whatever that is and plan accordingly. An experienced financial advisor can help you to tailor your strategy for your particular strategy.
Of course, if you are a fixer-upper "flipper" with two or more properties already owned, you may already understand how to finance all of your future acquisitions with part of the proceeds from the sale of your currently owned properties, so that after your first property or two you never need to lay out any new cash or get financing again. But what if you are a real estate investor who buys properties to rent them out, or you have not reached the point in your flipping business where you can finance everything with sales proceeds?
Any investor in real estate is well aware of the need to get the best deal on the purchase that you can; however, the financing offered by banks is not always so conducive to this. Banks can also work slowly, which is death to the real estate investor.
One good option for creative financing of real estate investments is assuming a loan. This entails simply taking on the loan payments of the current owner. However, for this strategy to work for you, the property in question must have been originally financed with a low interest loan but currently have a high market value.
This is a technique which you should use only if the mortgage held by the current owner has an interest rate which is lower than the current prime interest rate. Additionally, you have to be certain that the loan agreement does not contain a "due on sale" clause.
Another great creative financing strategy option for investors is the lease option. This can save an investor a great deal of money. A lease option, simply put, is like a futures option in the stock market. Think of it as a "rent-to-own" arrangement, but with a deadline. You pay only a very small amount up front to the current owner - this is not refundable, much like an options premium on the stock market. You have then bought the right to rent out the property as well as the right to sell the property on or before the expiration date of your contract.
If you sign on to an agreement such as this, you should be certain that you have a "Full Right of Assignment" clause included in the contract. This will allow you to sell this property without any further consent form the current owner of the property. Such agreements also carry the stipulation that the owner must, upon request, sell you the property at a previously agreed upon price at any time before the expiration of the contract. You can cancel this contract at any time, but you will of course lose the premium by doing so as well as any rent you have received to date.
By thinking outside of the box, you can do very well in real estate investment. It is important to keep in mind your current situation, whatever that is and plan accordingly. An experienced financial advisor can help you to tailor your strategy for your particular strategy.
About the Author:
Author: James L. Hardcastle can show how to create customised Finance Solutions for multiple property investors. Visit "Loans Australia" website for more great information on property investment solutions by independent financial advisors.
No comments:
Post a Comment