Creative Financing:
Everyone wants to get into the real estate business. Why not? It’s lucrative, offers a ton of benefits, and especially now, everything is undervalued. Unfortunately, credit is locked up, and it’s tough to get a mortgage. Despite these negative circumstances you should not give up. There are plenty of ways around a problem you just have to look (or be a little creative).
Creative Financing: An excellent way to avoid costs and complete a deal
Everyone wants to get into the real estate business. Why not? It’s lucrative, offers a ton of benefits, and especially now, everything is undervalued. Unfortunately, credit is locked up, and it’s tough to get a mortgage. Despite these negative circumstances you should not give up. There are plenty of ways around a problem you just have to look (or be a little creative).
Your credit may be low, you may not have a lot of income, yes, these can pose some problems, and block you out from getting financing, but you can still buy real estate. You may be saying what? how? Well, let me throw out a simple, maybe obvious answer to that question, why not try finding a partner who has the credit and income to show. Propose a partnership, put some money in the deal, and now you can get into the game without worry.
Not fond of company? Do you like to work alone? That’s fine, there’s got to be a way around that problem as well. Perhaps you have heard of these terms or you have not, but I will go over them now: assumable mortgage and seller financing.
Assumable mortgage: An owner most likely has a mortgage on the property they own. The question is, is the mortgage assumable, can you take it over? There are two ways you can go about this. You can assume the mortgage from the current owner, which should prevent you from getting in trouble in regards to your credit score or income. If you happen to run into issues there is another solution that solution is… if the owner of the property is a corporation, chances are it is, then take over ownership of the corporation, the mortgage will remain as it was.
Seller financing: A seller can offer financing on a property. Essentially, they act as the bank and hold a note on the property. Typically this is great to have, this shows partly confidence that the property will keep producing income. It also allows you to put down less money on a deal in some cases.
Putting this all together, we can creatively finance real estate. You will have to do some digging, perhaps search through many properties, but deals are out there, just dig and you will find them. You may be asking what kind of deal am I looking for? I will tell you what kind of deal based on what I mentioned previously. First, try to find a deal in which the seller has a mortgage, they may announce in the listing it is assumable, or you may have to ask, but this should be the first thing to find out. Let’s say you find that deal that has an assumable mortgage.
From here, you have two options, you can determine your down payment based on the asking price (or agreed upon price) minus the assumable mortgage, and if you have that cash, then great you can pull together a deal! If not, your next step is to ask the owner if they would be willing to offer you seller financing. Typically, seller financing on a deal will be a second mortgage, the owner will not offer a lot, but perhaps a reasonable amount to help you complete the deal.