Real Estate Investing 101
The recession is here and is progressively falling. This doesn’t mean you can’t make money anymore. This is a buyer’s market and the recession has not hit rock bottom YET. In fact, now is the absolute PRIME time to purchase.
Real estate is one investment that is desirable by anyone and everyone. Everyone needs a place to live. If you cannot afford to purchase a home of your own, you have to rent. One way to make money in a down real estate economy is to buy a home on the verge of foreclosure where the residents are still living in the home.
By purchasing a home that is on the brink of foreclosure, you can allow the former owners to stay in the house and continue to make payments to you as their landlord. You will be getting all of the tax benefits as well as be the ultimate owner of the home. You can refinance the mortgage so that the interest rates are lower and the mortgage rate is much less than what the people were originally paying. You can help them out of their bind by lowering their monthly rent payments and allowing them to stay in their home for a period of time until they can afford to either buy the home back from you or move on.
If they cannot afford to carry on living in the home any longer, you can rent the home out to other people. The home will be a long term investment for you as well as a tax write off. If you are arranging to invest in real estate in this manner, make sure that the home is located in a solid area where the property values are increasing. In a few years, the market should rebound making your home worth a lot more than when you purchased it.
In a lot of cases, a person who is on the verge of foreclosure has no idea what they can do to help themselves. If they have children who are attending a nearby school district, they do not want to relocate them. You can help them and make a wise investment if you purchase the home before it goes into foreclosure. This is known as the short sale and you will be merely assuming the payments as well as the incurring the debt from the bank. Since banks rarely lend out more than 80 percent of the value of a property, you are already getting, at the very least, a 20 percent discount off of the home. The longer the people have lived in the home, the less they likely owe for the mortgage. You will assume the mortgage payments, refinance the property at a lower interest rate and then rent the home to them.
This will make the people who are on the verge of foreclosure happy to be able to stay in their homes as well as have the liklihood to make you some money. If they have gone into foreclosure because of some unforeseen circumstance that will be alleviated, such as someone losing their job, you can make them an offer to rent to buy, which means that a portion of their rent can be used as a down payment if they want to buy their home back when things get better. It is very important to have a real estate attorney draw up any rent to own agreement. If done correctly, either way, you can make a solid investment and have renters who will most likely take care of the home.
Back to San Diego downtown real estate article index