Scribd
Upload
1K views

Pace - Creative Financing Hacks-2

The document outlines 4 creative financing methods for real estate investing with little to no money down: 1) Seller financing, where the seller carries the balance as a loan to the buyer. 2) Land contracts, where the buyer gets equitable title by making payments but not legal title until the balance is paid. 3) Subject to deals, where the buyer takes over the existing loan payments on the property. 4) Lease options, which are flexible agreements where the buyer leases with an option to purchase for a pre-agreed price.

Uploaded by

LG7 Properties
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
1K views

Pace - Creative Financing Hacks-2

The document outlines 4 creative financing methods for real estate investing with little to no money down: 1) Seller financing, where the seller carries the balance as a loan to the buyer. 2) Land contracts, where the buyer gets equitable title by making payments but not legal title until the balance is paid. 3) Subject to deals, where the buyer takes over the existing loan payments on the property. 4) Lease options, which are flexible agreements where the buyer leases with an option to purchase for a pre-agreed price.

Uploaded by

LG7 Properties
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 10

FUNDING KIT

CREATIVE
FINANCING
HACKS
Inside this brief guide, you'll find 4
proven methods of creative finance for
buying and structuring real estate with
little to no money down.
Two Ways to Structure Deals
In real estate, there are two ways to structure deals
with sellers...

Option 1: Cash or Financing


Most people know option one. Either you have a
bankroll to buy the property in cash (which is how
you can offer less than a home is worth), or you seek
out financing from a bank or other money lender.

With this method, the seller gets paid in full and


ownership is transferred to the buyer.

Option 2: Creative Financing


The second option is creative financing. Here, buyers
can use an alternative way to acquire or control real
estate without paying all or some of the cash up
front, like you would with cash or a bank.

As a real estate investor, it's important to understand


both methods to close more deals, but the goal is to
understand the situation the seller is in to know
which method is best for the deal.
FUNDING KIT
In summary...
CASH = PAY
LESS
TERMS = PAY
MORE, but...
The Two-Step Process
One way to start the conversation about creative
finance is to make an all-cash offer, judge the seller's
reaction, then see if there's room to negotiate
creative finance. Let's discuss this a little more...

Step 1: Make a Cash Offer


First, make a low all-cash offer (perhaps 60% of the
value of the home) to see if the seller's situation is in
a position to sell for a discount. Remember the
phrases "all-cash" and "close quickly" for this.

Step 2: Counter with Creative Finance


In many cases, the seller will counter back with a
higher price (whatever they see on Zillow usually).
Counter back that you are willing to pay more if the
seller with accept a creative finance solution.

This way, you can find out what is most important to


the seller: less money now or more money later.
Generally this depends on their situation. Did they
inherent the house? Is there a divorce underway? Or
do they have time to use creative finance which will
earn them more money overall.

Now, let's talk specific methods...


Method 1: Seller Financing
The first unconventional or creative financing
method is called "seller financing" or "owner
financing" (or sometimes "owner carry-back").

Rather than the seller being paid in full, the


seller actually agrees to sell the property with
little to no money down and then carry the
balance owed in the form of a seller-finance
loan. Basically, the seller becomes the bank.

For example, if a seller agrees to sell you a


property for $100,000, you avoid the bank or
third-party financer and instead set aside an
amount of time in which to pay off the loan.

Ownership would transfer like normal, but the


seller would be the lender. This might mean
paying the seller $2,500 per month for 40
months (adjust for closing costs, etc.).

This method is great, as it can be a win-win for


both parties, but it only works when the seller
owns the property free and clear.
Method 2: Land Contract
The next method is to use what's called a "land
contract" or "contract of deed" depending on
which state your deal is in.

A land contract is similar to seller financing


except you don't actually get the legal title of the
property until after you've met the terms and
paid off the full balance.

As you make payments on the land contract, you


will have what's called the "equitable title" to the
property. This keeps the owner from seller the
property to someone else or even putting the
property on a lien.

Like other creative financing methods, a land


contract - under the right circumstances - creates
a win-win scenario so an investor can purchase
the property with little to no money down.

Note: to protect your equitable title, file with your


city or county a "memorandum of land contract" to
put the public on notice of your interest in the
property.
Method 3: Subject To
A slightly more advanced creative financing method is
called subject to, or subto. The key here is to
understand how real estate lending works.

When someone buys a property and gets financing


from an institution to pay for some or all of the
property, that lender puts a mortgage or deed of trust
lien on the property.

This protects the lender because the owner has to pay


off the lien in order to sell the property, but also, if
there's a default, the lender can foreclose and take
back the property.

Subto is short for "subject to the existing financing."


Rather than buying the property and paying off the
existing loan, the investor takes over the existing loan
payments that are already in place.

The seller can walk from the property knowing the


payments are being made, insurance is taken care of,
and there are no additional hassles or further
responsibilities to consider.
Method 4: Lease Options
Finally, there's the "lease option," which is also known
as the "lease with the option to buy" method. This is
the most flexible method and easy to get out of for
both the buyer and seller.

A lease option is a contract between the owner and


buyer that lets the buyer lease the property for a
specified time with the option to purchase, generally
for a pre-agreed set price.

The buyer or tenant has the option to buy but is


under no obligation to buy. But, the seller does not
have the same exit strategy, meaning it binds the
seller to sell but not the buyer to buy.

This method is common in situations where the buyer


wants to buy the property but is unable to qualify for
traditional financing and may need time to save up
more money or improve credit.

Sometimes, to show good faith, the buyer puts down


a "non-refundable option fee" such as 3 to 10 percent
which can be applied to the eventual purchase.
Conclusion
Hopefully this brief guide created a general
overview to help you better understand how to
hack creative finance.

As an investor, it can take a great deal of work and


cost to find and identify motivated sellers, so
having more deal-closing methods in your toolkit
is key.

Following these four different creative finance


strategies will help you create more options to
profit on unique deals and to create win-win
situations for sellers without offering cash or using
conventional financing methods.

Go build your empire,

Want more step-by-step guidance?


Consider joining Pace Morby's Coaching Program here:
https://go.subto.com/start?el=pacemediamagnets

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy