Creative Real Estate Financing
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Creative Ways to Finance Real Estate
Overview
How can you finance a real estate deal? The possibilities are endless! Here are ten inventive techniques to kick-start your journey.
Techniques for Creative Real Estate Financing
Do these creative financing methods actually work in real estate? Well, it varies. They’ve all worked at least once for someone. The key is to understand the underlying principles, enabling you to develop your own strategies. Here are ten ideas to consider:
1. Hard Money Lenders
Hard money lenders offer short-term, high-interest loans, typically for "fix and flip" projects. You get the funds quickly, and if you earn $30,000 from a project, paying $10,000 in interest over six months might not matter much.
2. No-Doc or Low-Doc Loans
These loans require little to no documentation of your income or credit. You can find banks offering these online. They usually cover 70% to 80% of the purchase price, but if you have 10% in cash, you might borrow the remaining 10% or 20% from friends or the seller.
3. Seller Financing
Sometimes, a bank provides 90% financing, and the seller takes back a second mortgage for 5%, leaving you to cover just 5% as a down payment.
4. Land Contracts
A land contract allows you to make payments to the seller, receiving the title upon full payment. I once sold a rental this way, asking for $1,000 down to enjoy 9% interest and a higher price.
5. Credit Card Advances
If a seller requires $10,000 down on a fixer-upper that could yield $20,000, consider using credit cards. If your limit covers repair costs too, it’s a true zero-down deal. In six months, you might pay $1,000-$2,000 in interest on an 18% card. Don’t let $1,000 stop you from making $20,000.
6. Retirement Accounts
Though the rules can be complex, consulting a tax attorney might reveal how to borrow from your retirement account for real estate investments.
7. Borrowing from Friends and Family
If you choose this path, keep it professional. A 7% loan isn’t a gift if their money earns just 2% in the bank.
8. Real Estate Note Buyers
If a seller needs cash, they can raise the price to $100,000, sell to you with no down payment, and take back two mortgages. A note buyer pays $80,000 cash for the first mortgage at closing, providing the seller with needed funds. You make two payments, but entered with no money down.
9. Borrowing Against Another Property
Take a home equity loan you didn’t use for a vacation and apply it as a down payment on an investment property. This avoids breaching your primary mortgage lender’s rules?"achieving a no-cash-down entry.
10. Start Partnerships
For larger projects, arrange for multiple investors to contribute to a partnership, with your share being management duties rather than cash.
Remember, these ten creative financing techniques are just the beginning. Explore and discover what works for you!
You can find the original non-AI version of this article here: Creative Real Estate Financing.
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