There is a time to buy and a time to sell real estate investments. If you find it a time to sell an investment, you may be discouraged by the lack of buyers and even more discouraged by the lack of buyers that qualify for a loan in these times of tight lending standards. If this is your situation, you may want to consider selling with a wrap around mortgage.

Wrap around mortgages first became popular in the 1970s when interest rates shot up as high as 18%. The wrap around mortgage became popular because buyers were able to take advantage of much lower interest rates on homes with mortgages written before interest rates went shy high. How times have changed. Or have they?

At that time, real estate prices were more reasonable than today. The problem with the real estate market at the time was buyers couldn’t qualify for mortgages. Not because real estate was too expensive for their income but because the interest rates made the payments to high. Bottom line is buyers couldn’t qualify.

While today’s interest rates are at historic lows and home prices have dropped, the root problem remains the same as it was when wrap around mortgages became a popular financing alternative in the 70s. Buyers can’t qualify for conventional financing.

If you want to sell an investment property today, you need to consider seriously either the wrap around mortgage or seller financing. Generally, seller financing is more appropriate if you own the property out right. If you have an outstanding loan, you need to write a wrap around contract.

You gain big advantages in the market when you offer buyers some type of financing assistance. One benefit is you attract more potential buyers. The other biggie is you can often not only sell for full market price but at a 10% premium just by offering financing assistance.

With more potential buyers, you can be more selective whom you sell to. A few short years ago, many of today’s buyers would have easily qualified for conventional loans. It’s not that buyers changed. The lenders changed the rules. With a large pool of potential buyers to select from, it shouldn’t be difficult culling out the most qualified. Those not likely to default on the payments.

How big is the actual market? That depends on the lending standards you establish. If you decide to offer financing to select individuals that went through a foreclosure for little or no cause of their own, the buyer market will be much larger. Same thing for people that have gone through short sales. These people are locked out of the conventional lending market for years to come.

Offering financing to these people is the exact reason you get above market value for the property. These people have few options other than renting. Many will not only pay a premium purchase price but a premium on the interest rate.

Just because buyers are locked out of conventional lending doesn’t mean they don’t have substantial down payments. Done correctly, offering a wrap around mortgage can be your best exit strategy in today’s market. All you need to do is select a trusted buyer that is creditworthy in your opinion, require a substantial down payment, ask a for a premium on the purchase price and charge an interest rate above what you’re paying on your mortgage. There is a lot more upside to the wrap around mortgage than there is down side.