Creative Financing Options
A bank loan doesn’t always meet your needs. Below are ten of the most common techniques used in the world of real estate to get your creative financing wheels turning!
- Interest-only loans — If you are an investor looking to purchase, rehab, and sell a property quickly, an interest-only loan may make sense. This financing allows you to make small payments at the beginning of the loan, leaving more money for renovations. When you sell the property for a profit, you can pay the loan in full while having paid only a small amount of interest.
- Seller carryback — Also known as owner financing, the seller of the property agrees to finance the property outright. They transfer the title to you in exchange for a promissory note and deed of trust for the full purchase price of the property.
3. Seller second mortgages — If the buyer can get a loan, but not for the full price of the property, sometimes a seller’s second mortgage is needed to make the transaction possible. Here, the bank mortgage pays the seller for the bulk of the amount owed (for example, 80 percent), and the seller deeds the property to the purchaser in exchange for a promissory note for the amount of the balance remaining (in this example, 20 percent).
4. Contract for deed — Similar to seller carryback, a contract for deed is another method of owner financing. The difference under a contract for the deed is that the seller retains the title to the property until you have paid the mortgage in full.
5. Private mortgages — Private mortgages work like mortgages from a bank, but since the lender is an independent entity, they can follow different guidelines for lending. Interest rates are often higher, but this creative mortgage technique allows more borrowers to qualify for a loan.
6. Assume payments — If you can find a seller who needs to sell a property quickly and has financing in place, you can assume the seller’s payments, often with little or no down payment.
7. Short sales — A short sale is when a seller markets the property for less than the amount owed against it and the lienholder agrees to accept that amount as payment in full. Sellers often do this to avoid the credit implications and costs of foreclosure. Purchasing short sales allows you to purchase property at a discounted price. The resulting immediate equity in the property makes this a wonderful creative financing strategy!
8. Lease options — A lease option allows the buyer to rent the property for an amount of time, with a portion of their rent credited toward the purchase price of the home. At the end of the lease, the buyer has the option to purchase the property at the amount agreed upon when the lease was created.
9. Retirement accounts — Most retirement accounts will allow you to borrow from yourself and repay the funds over time at a low interest rate. What a great creative financing resource!
10. Loans from family and friends — Friends and family may be willing to invest in your business as personal loans. Talk to the surrounding people, share your enthusiasm and your needs, and perhaps Aunt Jan’s loan will be the next option in your creative financing approach.
These creative financing options are only the tip of the iceberg! If you would like to find out how you can qualify for any of our affordable housing initiatives, or if you are interested in finding out how to gain a double digit low-risk turnkey return every 30 to 45 days on a short-term investment with us, secured by real estate, look no further.
If you are an accredited investor or private group searching for a more lucrative opportunity to invest in the infrastructure and future profitability of the only company in the world that is on the fast track to usher in a new era of affordable housing and homeownership initiatives, please do not hesitate to contact us now!
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