What is Creative Financing?
Traditionally if you wanted to buy a house or a piece of property you would have to save up your money for a down payment, apply for a loan at a bank, jump through 50 hoops to get approved, go to the closing table to get the keys. TIMES HAVE CHANGED!
Here is a list of ways I purchase property with Creative Financing Strategies:
| Wholesale |
| Connecting a property that we have under contract with an end buyer. Look to collect a wholesale fee. |
| Subto |
| We are trying to keep their mortgage in place. This property has a debt which could be a mortgage or lien. Look at their percentage rate and payment or “PITI” which is made up of the principal, interest, taxes, insurance. We then need to compare the PITI to the current rent rates so we know what we can get in return or what the spread is. |
| Lease option / Seller Finance / Agreement for Deed |
| Seller creates a mortgage. They own the property free and clear. You are having the seller essentially be the bank where you can negotiate the percentage and length of terms on the finance option they are creating. |
| Wrap |
| We are operating as the bank essentially where they otherwise would not be able to qualify for a traditional loan. If you ever want to buy a rental property you are going to the bank and will be getting a loan with a deposit down of 25%-35%. Myself, knowing creative financing, I could wholesale you a deal that I had set up with a seller already at 0% interest. You would then only pay me a 10K assignment fee with the seller only asking for 5k down. That’s only 15k in with 0% interest. Do you see why someone would want to come to me for a loan rather than a bank? Why would you ever go buy a rental when you could buy a home with a sub to or seller finance in place? |
| Sub Tail |
| Instead of me going to get a hard money loan to get a fix n flip, why not just buy a house in place with 3.5%-4% (down payment?) – that way I don’t have to get a hard money loan and it’s way less expensive on my monthly payments during the duration of the renovation. I can then take that to the MLS and sell it retail. |
| SRRR Method: |
| Purchase the house Sub2 mortgage, Rehab the Property, Rent it out, Refinance it to recoup your remodel money and costs, rinse and repeat. |
| Group Homes |
| Can be labor intensive depending on the situation (just to be transparent), but can also provide ridiculous cashflow. Not sure if you are aware, but tenants in group homes pay by the bed (not the room), and there is also big time government tax breaks for these deals. |
| AirBnBs |
| Super hot method, especially if you are in a frequent travel spot. Properties don’t have to be in vacation-central to cashflow here either. Even hoppin’ spots next to the airport or convention center can be a cash cow. |