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Creative Investing and Financing Techniques
By Vic Hurlstorm | October 4, 2008
Investing in real estate is one of the most effective ways accumulate wealth quickly when you do not have a lot of capital to invest up front. However, this all depends on how creative you are. Investing in real estate traditionally involves buying, owning, renting, managing and selling property for a 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.
How can one obtain the right financing? 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 investors think about doing when they start out. They try to find people to split the deal fifty-fifty and someone else put up the money. You can make much more doing it other ways but this is an option.
Hard Money Lenders are 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. Many hard money lenders don’t like to lend more than 65% of the fair market value of a real estate property, so the better the deal, the more options you’ll have.
Private Lenders can be an even better alternative to hard money lenders because you can often arrange better terms since you are dealing with someone privately. Remember, a private lender can be anyone even friends or family. 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” Financing comes from the clause “subject to existing financing”. With this strategy you are leaving the existing financing in place and just taking over the payments on the sellers existing mortgage. Your name is no where on the loan. The sellers name will remain on the note. Seller financing can be done in simliar ways to this as well. If you have poor credit and want to begin investing quickly, this is an excellent strategy.
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. There is no need for excessive cash, credit or financing because of this and it’s virtually risk free with no need to do repairs or work yourself. 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. Compare the terms of each option and look at as many options as possible. Doing this will help you determine what works best based on your individual circumstances.
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