Creative Investing and Financing Techniques
By Editor • Oct 6th, 2008 • Category: InvestingWhen you don’t have a lot of captial up front, investing in real estate is a great way to accumulate wealth rather quickly. However, this all depends on how creative you are. 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.
So, how does one obtain financing creatively? Some of the most popular, just to name a few, are listed here
Partnerships are fairly common because this is first thing a lot of real estate investors think about doing when they start out. Often new investors want to find someone who can front the money and then split the profits fifty-fifty. There are better ways to make more but this is an option.
Hard Money Lenders are individuals or companies that have cash ready for you to borrow. This is usually a better alternative than traditional banks even with a low credit score and it is a great source for getting funds quickly. 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. 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. The loan papers do not contain your name at all. The note will stay in the name of the seller. There are other ways to do similar seller financing 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. This is virtually risk free with no need for excessive cash, credit or financing and 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. You need to look at as many options as you can then compare each one of the terms. This way you’ll know what will work best for your individual circumstances.
Editor is based in England.
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