Even investors with excellent credit and large bank accounts find it next to the impossible to finance investment with traditional bank loans. There are many alternatives. Here are just a few ideas:
1. Personal loan. Discover cash buyers and private lenders in your area by checking public records, getting a list of high-value individuals in your area from the list of brokers, or networks with other investors. Prepare a short presentation for use when these high net wealth individuals express interest in learning about your project and then match projects when they come with investors who express the desire to review their profile. Some of these private lenders may prefer direct roles by taking equity positions in an agreement, while others prefer to take the position of the first mortality as a personal lender.
2. Financing owner. The owner with lots of equity and does not need to have a large cash window will sometimes choose to be paid over time by financing the buyer. Often advance requirements will be smaller than bank loans, and maybe even no credit checks. The owner will produce more than they did by sticking out the results of sales in a CD or Money Market account, and the tax consequences will be spread on loan life.
3. Rent-option. In the rental option, the owner offers rent with the option to buy on several specified dates. Buyers pay the option fees for privileges to have the right to buy property before the deadline and at prices are in the option contract, or determined through an assessment close to the date of purchase. Buyers generally lose option fees if they do not buy in the specified period, although often options can be extended or negotiated. The lease agreement sometimes provides that some payments will be set aside for advances during payment is made in a timely manner. The owner maintains tax deductions until the option is done.
4. Assign mortgages or subjects. When there is little or no equity one strategy is to take ownership of the “subject-to” mortgage today. If there are some owner’s equity will want the difference as a down payment, or maybe willing to “wrap” balance with a current mortgage with a slightly higher interest rate. Buyers benefit from tax deductions and obtain new warranty deeds or trust certificates and are responsible for all maintenance costs. If the new owner fails to make a timely mortgage payment, the former owner will have the option to lie down.
5. self financing. Buyers with a lifetime policy or 401k are directed themselves may be able to take cash to fund real estate deals during plans to repay the account. The unpaid amount may be subject to a capital increase after a period of time or if the account is closed. Basically you will pay yourself back at the interest rate that is very simple because the loan is paid back.
