My Blog

Top 26 Creative Financing Strategies to Buy Real Estate.

 

  1. Hard Money Loan-Asset based financing.  House is qualifying for the loan and not you.  Typically the most expensive way to finance.  Short term.  Usually 65-75% LTV.
  2. Portfolio Loan – A loan made by a smaller, local bank or credit union.  They do not sell into the secondary market they keep in house.  Conventional rules do not apply. Conventional rules do not apply. Loans based on the income/value of the property not your credit and income.
  3. Master Loan Commitment – Negotiate a loan commitment like a line of credit with a portfolio lender. Rehabbing, flips and even long-term refinances from hard or private money.  Great for big rehabbers, developers and mortgage brokers. 
  4. Stock Loan – Securities based loan.  80% of the value of your stocks, bonds or mutual funds in your portfolio.  Non-recourse.  True NO DOC – no credit, income or employment verification.  50K minimum. You don’t have to liquidate your securities…….you just borrow against them.
  5. Blanket Loan – One Loan that wraps up multiple properties.  Usually residential. Portfolio lenders & some rules such as must be in same state, city, county or contiguous.  Property lines must be touching.
  6. LLC Loan – A loan originated in the name of your entity that does not report to your personal credit report.  Must be personally guaranteed.  Usually from portfolio lenders.  A tactic to ‘free up capacity’ for conventional loans.
  7. Self-Directed IRA – Allows you to invest in real estate using your IRA or 401K.  Look for checkbook control.  Excellent for recruiting private money partners as well.
  8. Non-Recourse Loan – Any loan that is not personally guaranteed by the borrower.  The recourse is limited to the property only.  Primarily for commercial loans of $5million and up or in deals with very low loan to value. Special non recourse loan for SDIRA’s. 
  9. Land Contract – An agreement where the buyer makes installment payments under a purchase agreement.  Also known as contract for deed, bond for deed and agreement for deed.  Can be a land trust for asset protection.  Seller holds title until the balance is paid.
  10. Lease Option – is an option buy the property while being leased.  Sandwich lease option means you lease option a property from a seller and then RE-LEASE it to a tenant buyer on a lease option.  Title stays in SELLER’s name.  Can be executed or flipped for a fee!
  11. Subject To – Buy a property by taking over the existing financing. Can sell subject to as well.  Title transfers to the buyer.
  12. Master Lease Option – exactly like a sandwich lease option buy on commercial income property.  100% purchase financing.  You increase the income to improve the value and cash out equity when you buy.  You can assign the option for cash.
  13. Rehab Loan – A construction loan for existing property.  Loan usually based on the ARV or loan to cost. LTC…Initial purchase funded and the repair money is distributed via draws.  Usually done with hard money, bridge or portfolio lenders.
  14. Transactional Funding – short term money typically used for double closings. 24 hours to 95 days.  95 day funding is usually equity participation.  No qualifying – must have the B to C deal approved for 24 hour funding.
  15. Private Money – Leveraging private individuals to fund your deals.  You dictate the terms, rates, structure, etc.  100% financing with NO qualifying.
  16. Debt Partner – Private money partner that invests in your deal in exchange for a set return each month.  No profit participation.
  17. Equity Partner – a private money partner that invests in exchange for profit participation in cash flow and or equity.  Most expensive private money but easiest to find.  Don’t be greedy if you have no ‘skin in the game.’
  18. Credit Partner – residential deals only.  Used to qualify for conventional loans.  Credit partner is the borrower and details of the arrangement are spelled out in a joint venture agreement.
  19. Seller Carry Back - When the seller agrees to carry back a second mortgage on the property.  Typically 15-25%.  A strategy to use with bridge and portfolio lenders to get to 100% financing!
  20. Wrap Mortgage – One promissory note for the entire loan.  Two mortgages secure the promissory note.  1st (original) mortgage in seller’s name.  2nd (new) mortgage that seller is carrying back.  Buyer makes ONE payment (PITI) to seller.  Seller pays the 1st mortgage and pockets the proceeds of the 2nd.  Title transfers to buyer.
  21. Shared Appreciation Mortgage – Seller agrees to a below market interest rate in exchange for a share of the appreciated value of the property.  The share of the appreciated value is known as the contingent interest which is determined and due at the sale of the property.
  22. Performance Mortgage – A mortgage that is recorded to secure a lease or purchase option. Accomplished with a performance mortgage or deed of trust.  If the seller breaches his option agreement, you can foreclose.
  23. Fractionalized Trust Deed – A private money loan where one mortgage or deed of trust is secured by up to 10 promissory notes.  10 debt partners all in equal lien positions.
  24. Syndication – Pooling capital from multiple private money debt and or equity partners to take ownership of real estate.  Rules on disclosure, offerings and marketing from the SEC.  Simple JV’s LLC’s , LP’s, PPM’s, REIT’s and Hedge Funds. 
  25. Participation Loan – A loan that is hared by a group of banks that join to make a loan too big for any one of them alone.  May want profit participation for loans.
  26. Cross Collateralization – Pledge equity in one property as collateral for a loan on another.  If you default on subject property lender can take the other property to. So be careful using this strategy.
Posted By - Robert Farmer - 2 days ago

View By Category
Real Estate (11)