Creative Investing and Financing Techniques
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It has been a long held belief that investing in real estate is one of the most effective methods used to accumulate wealth quickly, especially when it concerned capital necessary to make the investment. However this all depend 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 what are some creative ways to obtain financing? There are many, but here are some of the most popular; to list a few:
Partnerships are fairly common because this is the first thing a lot of real estate investors think about doing when they start out. They want to find somebody who can put up the money and split the deal with them fifty-fifty. This is an option but there are better ways to make a lot more.
Hard Money Lenders are individuals or companies that have cash ready for you to borrow. This is usually a much better alternative than traditional banks since it is a good source for getting funds quickly even if you have a low credit score. 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 not going on the loan. It will stay in the seller’s name. There are other ways to do similar seller financing as well. This is an excellent strategy for those who have poor credit to begin investing quickly.
Wholesaling or Flipping are 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. Because of this, it’s virtually risk free, there is no need for excessive cash, credit or financing, and you do no repairs or work yourself.
This is why when it comes to making quick cash in real estate, this method of wholesaling 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. I would encourage you to look at as many options as possible, then compare the terms of each. This way you'll know what will work best for your individual circumstances
The above techniques are some of the more popular ones available to the real estate investor as stated earlier in this article, but like anything that is worth something of value and the potential for substantial profits there are risks associated with them. The "Subject to" investing method is the most risky simply because many of today's mortgages contain acceleration clauses that become effective upon the transfer of title, so make sure to do your homework before using this technique.
