When Great Deals Come Along You Have To Be Prepared To Act!
Experience has shown that in order to take advantage of many of the best real estate opportunities, you need to be able to act fast and be prepared with your financing. You cannot wait for the right property to come along without having an exact understanding of how your going to finance it. The best opportunities often arise when the seller, for whatever the reason, needs to sell their property quickly. This often only allows for a couple days to make an offer or you lose the property to a more prepared buyer. We are experts at matching financing options to properties, resulting in our customers to make more deals a reality and build their real estate portfolios.
Options Your Banker May Not Allow Or Know About! That’s why it’s called Alternative Financing.
Below are some alternative financing options that may or may not be used in conjunction with a bank loan so that you can take quick action when the right real estate opportunity arises.
- Interest-Only Loans — If you are an investor looking to purchase, rehab, and sell a property quickly, an interest-only loan may make sense. This financing allows you to make small payments at the beginning of the loan, leaving more money for renovations. When you sell the property for a profit, you can pay off the loan in full, having paid only a small amount of interest.
- Seller Carry-Back — also known as owner-financing, as the seller of the property, under the right circumstances, we can agree to finance the property outright. We transfer the title to you in exchange for a promissory note and deed of trust for the full purchase price of the property.
- Seller Second Mortgages — If the buyer (you) can obtain a loan, but not for the full price of the property, sometimes we can offer a “seller second mortgage”. This might be what’s needed to make the transaction possible. In this case, the bank mortgage pays us, the seller, for the bulk of the amount owed (for example 80 percent), and we, the seller, deeds the property to the purchaser (you) in exchange for a promissory note for the amount of the balance remaining (in this example 20 percent).
- Contract For Deed — Similar to seller carry-back, a contract for deed is another method of owner- financing. The difference under a contract for deed is that Outside In Enterprises retains the title to the property until the mortgage has been paid in full.
- Private Mortgages — Private mortgages work like mortgages from a bank, but since the lender is an independent entity, they can follow different guidelines for lending. Interest rates are often higher, but this creative mortgage technique allows more borrowers to qualify for a loan.
- Assume Payments — If we can find a seller who needs to sell a property quickly and has financing in place, we can assume the seller’s payments, often with little or no down payment.
- Short Sales — A short sale is when a seller markets the property for less than the amount owed against it and the lien-holder agrees to accept that amount as payment in full. This is often done to avoid the credit implications and costs of foreclosure. Purchasing short sales allows you to purchase property at a discounted price. The resulting immediate equity in the property makes this a wonderful creative financing strategy!
- Lease Options — A lease option allows you, the buyer, to rent the property for a given amount of time, with a portion of your rent credited toward the purchase price of the home. At the end of the lease, the buyer, you, has the option to purchase the property at the amount agreed upon when the lease was created.
- Retirement Accounts — Most retirement accounts will allow you to borrow from yourself and repay the funds over time at a low interest rate. We can help you work with these.
- Self-Directed IRAs – The Internal Revenue Code does not describe what a self-directed IRA can invest in, only what it cannot invest in. Internal Revenue Code Sections 408 and 4975 prohibit Disqualified Persons from engaging in certain types of transactions. Some of the additional investment options permitted under the regulations include real estate, stocks, mortgages, franchises, partnerships, precious metals, private equity and tax liens. Real estate may include residential and commercial properties (U.S. & Internationally), home flipping, farmland, raw land, new construction, property renovation, development, and passive rental income.
- Loans From Family and Friends — Friends and family may be willing to invest in your property purchase in the form of personal loans. Talk to the people around you, share your enthusiasm and your needs, and perhaps “Aunt Jan’s” loan will be the next option in your creative financing approach.