Creative Real Estate Financing

Creative Real Estate Financing



Creative Real Estate Financing
Do the​ creative real estate financing techniques you hear about really work? Yes and​ no .​
They likely have all worked somewhere for​ someone at​ least once .​
The important point is​ to​ understand the​ principles involved, so you can find your own creative ways to​ invest in​ real estate .​
Here are ten methods to​ get you thinking.
1 .​
Use hard money lenders .​
Ask around or​ find these online .​
These lenders specialize in​ short-term loans at​ high interest .​
Typically, you use this type of​ financing for​ a​ fix and​ flip .​
You can get the​ money fast, and​ if​ you make $30,000 on a​ project, who cares if​ you paid $10,000 interest in​ six months?
2 .​
No-doc or​ low-doc loans .​
With these loans, no (or low) documentation of​ your income or​ credit is​ required .​
You can find banks that do these online now .​
You'll only be able to​ borrow 70% to​ 80% of​ the​ purchase price or​ property value .​
However, if​ you have 10% in​ cash, you might be able to​ borrow the​ other 10% or​ 20% from a​ friend or​ the​ seller.
3 .​
Seller financing help .​
Sometimes a​ bank will loan you 90%, and​ allow the​ seller to​ take back a​ second mortgage from you for​ 5%, leaving you needing only 5% for​ a​ downpayment.
4 .​
Land contract or​ contract for​ sale .​
Called other names as​ well, this just means the​ seller lets you make payments, and​ delivers the​ title upon payment in​ full .​
I​ sold a​ rental this way for​ $1,000 down, because I​ wanted the​ 9% interest, and​ the​ higher price I​ got.
5 .​
Credit card advances .​
Suppose a​ seller will take $10,000 down on a​ fixer-upper that you expect to​ make $20,000 on .​
Why not use credit cards? if​ your card limits allow for​ repair money too, this is​ a​ true 0-down deal for​ you, and​ if​ you turn the​ project in​ six months, you will have paid maybe $1,000 or​ $2,000 in​ interest on an​ 18% credit card .​
Don't let $1,000 get in​ the​ way of​ making $20,000.
6 .​
Use your retirement accounts .​
The laws are pretty complex in​ this area, but you can check with a​ tax attorney to​ see how you might borrow from your own retirement account to​ finance real estate investments.
7 .​
Borrow from friends and​ family .​
If you go this route, keep it​ all business .​
In any cae, loaning you money at​ 7% isn't a​ gift if​ their money is​ getting 2% in​ the​ bank.
8 .​
Use real estate note buyers .​
Suppose the​ seller needs cash .​
He raises the​ price, and​ sells to​ you for​ $100,000 with no money down, taking back two mortgages from you for​ $90,000 and​ $10,000 .​
He arranged (or you did) for​ a​ note buyer to​ pay him $80,000 cash for​ the​ first mortgage at​ closing, getting him the​ cash he wanted .​
You pay two payments now, one to​ each note holder, but you got in​ with no money down.
9 .​
Borrow on another property .​
If you take out a​ home equity loan for​ a​ vacation, and​ then forget to​ use it​ for​ that, you can later use the​ money for​ the​ downpayment on an​ investment property, without violating the​ rules of​ the​ bank that gives you the​ primary mortgage .​
In other words, you got in​ with no cash of​ your own.
10 .​
Start partnerships .​
For bigger projects, you could arrange for​ five investors to​ each put money into a​ partnership, with your share being the​ management responsibility instead of​ cash.
Remember, these ten creative real estate financing techniques are just to​ get you started.




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