These people tend to tell that the key is to use capital that’s not your own – like from a bank. I understand how it works with common mortgage. But let’s say I already have a mortgage, thus own one property/real estate. Now I’m in debt towards the bank and they’re not giving me another loan to buy another flat since I need to be repaying the first one (?).
So, how does it work? Where do these people get the needed money to buy the second property? The third one?
In: Economics
Secured debt.
Commercial real estate mortgages usually have language whereby if you default on paying they can immediately come into court and get the rental income transferred to the lender. Commercial real estate foreclosures are generally quick and easy (no consumer protections) so the lender can quickly get title to the property and resell it. You can also do “blanket” mortgages where a bunch of properties are securing a loan for big lump sum.
As long as the lender has sufficient collateral to cover the loan, they are OK.
Problem for the property owner/borrower is that if they get into trouble, things go sideways really fast
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