Creative Investing and Financing Techniques
When you don’t have a lot of capital up front, investing in real estate is a great way to accumulate wealth rather quickly. This all depends on your creativity however. Traditional real estate investing by definition involves the purchase, ownership, management, rental and/or sale of real estate for profit. Under this definition, real estate is an asset form with limited liquidity relative to other investments, and traditionally is highly dependent on cash flow, but when we look at creative ways of investing in real estate a lot more opportunities are open to us.
What are some ways to finance real estate creatively? There are many but here are some of the most popular to list a few:
Partnerships are fairly common because this is first thing a lot of real estate investorsthink about doing when they start out. They try to find people to split the deal fifty-fifty and someone else put up the money. Although this is a good option, there are ways to make a lot more.
Hard Money Lendersare individuals or companies that have cash ready for you to borrow. Even if you have a low credit score this is a good source for getting funds quickly and is usually a better alternative than traditional banks. If you consider that many hard money lenders don’t want to lend more than 65% of fair market value of a property, you will come to the conclusion that the better the deal the more options you will have.
Private Lenderscan be an even better alternative to hard money lenders because you can often arrange better terms since you are dealing with someone privately. One thing to remember, even friends or family can be a private lender and it applies to anyone. Everybody wins because you are offering them a much better rate of return than they will get in their savings or mutual funds and it’s secured by real estate.
“Subject to” Financingcomes from the clause “subject to existing financing”. You can take over the seller’s present mortgage using this strategy or simply leave the current financing in place. You are not going on the loan as the responsible party. It will stay in the seller’s name. There are other ways to do similar seller financing as well. This is an excellent strategy for those who have poor credit to begin investing quickly.
Wholesaling or Flippingare specific real estate investing strategies that are essentially creative solutions to eliminate the need for obtaining any funds at all. This is where you tie up a property at a discount (using an agreement) and then flip the property to another buyer or real estate investor for a quick profit. You don’t need to do repairs or work yourself and because of this there is no need for excessive cash, credit or financing making it virtually risk free. This is why when it comes to making quick cash in real estate, this method of flipping houses is one the best routes to take not only for avoiding many of the financing headaches, it allows you to make cash more quickly for today’s real estate market. I would encourage you to look at as many options as possible, then compare the terms of each. You know your individual circumstances, this way you’ll also know what works best for you.