This is the years where creative real estate financing comes to good use. Are you one of the real estate investors confused on how to get a deal done without traditional methods? Maybe you think financing meant you saved up enough to put 20% down on a real estate investment, and then got a mortgage for the other 80%? You can still do that, but there are many more options now. Here are 10 of them.
#1 Second mortgage loans from sellers or even better, sellers can finance the whole thing.
Yes, it is possible. You just have to ask. Of course they might not be the best terms compared to traditional bank financing but when you are low on cash and short on time (yes, I know when does that ever happen?) you can get the deal done and still make a profit. Just check your numbers first.
#2 Get a piece of your broker commission.
You might have to check on the laws about this but it has been done. Deals have been successful when real estate investors get their realtors to finance the property using the commission.
#3 State government housing programs.
Just about all the states have financing help in the form of a loan-guarantee program. This might be useful for real estate investors.
#4 VA mortgage loans.
If you have been in the armed services, you can probably acquire an investment property with a VA loan. This might be useful for first time real estate investors. Anything to get that first deal done.
#5 Contract for sale.
Also known as a "land contract" it just means that you make payments to the seller instead of a bank. It's up to you and them to negotiate down payment amount, interest rate, and the term of the loan. Real estate investors looking for short term financing will find this helpful.
#6 Lease with an Option to Purchase.
If you got a good deal but can't finance it right away, this is useful to tie up the property. You can technically still make a profit from a property YOU’RE renting by re-renting (sublease) it. After, you found a source of finance; you have that option to purchase it.
#7 FHA mortgage loans.
The Federal Home Administration doesn't actually loan the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, depending on the particular FHA program. Google it, they're useful even for long time real estate investors.
Many real estate investors, the big time, multi millionaires have found this gold mine to purchase their huge investments.
#9. Bank no-doc loans.
Yes, they exist, and still around. Might not be around as much but they get the deal done. For those who don't know why real estate investors find this a god send is because "No-doc" and "low-doc" loans, means no or low documentation requirements. They are for those of you with bad credit but 20% to 30% to put down on a home. The finance is based on the property's ability to pay the debt NOT necessarily the person (of course there are some rules about it, nonetheless it is helpful).
#10. Your credit cards.
Whoever said credit cards cost money? Let’s start making credit cards work for you. It is a risky way, but if you have a low-interest credit card, you'll be able to use it to come up with the down payment, especially if you can pay it off soon, perhaps with a check from the first month's rent from the tenant.
Are there more ways to approach real estate financing? You bet. Real estate investors have come up with many ways to get profitable deal done. In fact, these are just 10 of the hundreds if not thousands of ways real estate investors use to finance property.