Creative Financing - Post 10.01.2008

Creative Financing - Post 10.01.2008

I have started this forum topic even though I am sure some of the information is here, because I feel it would be best all in one spot.

Please give examples only. If you want to be go into detail on the topic of financing you should look for that topic and do so.

As food for thought, and commenting, I have good credit but to high of debt/income ratio. Hard Money lenders appear to be wanting tangeble collateral and investors are looking for the same deals I am and possibly have already spent the available funds.

Many people have successfully made deals happen with no money using creative financing options. I would appreciate it, others would deffinately benefit from it, if others would share there experiences on how they overcame the excuse of bad credit, no down payment, etcetera to make deals happen!

Thank you DG community.


Creative Financing

If you are looking to buy and hold, how does one obtain title to the property with out traditional financing?

Assigning works when you want to make some money quick but it seems as though investors in my area are able to find there own deals and would not want a deal that I found. The reason I feel this is true is because of the following: Say I find a property with a listing price with 15% equity built in and I lock it up after negotiating with 25% equity. I then begin to look for someone to assign it to. But if I want to make some money so I aim to assign it to person 'X' for a price with 20% equity giving myself a 5% finders fee. Problem comes in where there are many homes in the area where you can find a 20% built in equity. So then I am left to explain the differences between this home and that home, which can be difficult. I assume some of the aspects which would be beneficial would be local shopping, nearby schools, location to highways or interstates for commuting benefits. Knowing your rents for certain areas would also be a plus. But all told, assigning is a tool for making money, but it does not allow you to buy and hold. What it can do is allow you to make some money to allow you a down payment to buy and hold a home with traditional financing. You may need to successfully assign multiple homes before you have a substantial amount built up for the down payment.

I have been thinking about business partners. Sounds scary...I know. But looking, and finding, someone who trusts you to run the business and who can fund your deals would be perfect. Of course, you would have to negotiate some kind of amortized payment plan for each deal in that you used his funds to purchase. In this scenario you would purhase the home, using his/her money, which you agree to pay back over 30 years at X% APR and then you rent out the home using the rental income to pay for the note to your partner. where to find the money tree...?

Hard money lending is something I am new to. Sounds like someone of the nature described above but would charge more for the notes. Some hard money lenders may require collateral such as the title to your car or home before they will consider funding your project. Not to mention, they will make sure there is enough margin in the deal so that if you default there is money in it for them. We will see what I can find out about this kind of lending.

Cash advance on a credit card is another option that DG has utilized quite a few times to aquire property. Lets entertain this idea for a minute with a hypothetical situation: Say you have a credit card where you can pull cash from. You have an available balance of 20K for cash advances. You need 15K plus 5K for the downpayment and repairs respectively. Call your CC company and ask them to transfer 20K from your CC to your bank account. They will charge you a balance transfer fee of around $75 which would be 3% of the amount transfered up to a maximum of $75. Be careful, some cards have no maximum fee amount. Iterest on the money transfered is subject to a different interest rate so review your CC fine print to determine what your rate would be. Lets be safe and assume it is 20% APR. 20K would be $333.34 per month interest only and most likely about $400/mo after you include a little principle payment. Usually there is a grace period on the transaction which means no interest is charged until the period expires which could be up to 30 days. Again, check with your CC company to determine all fine print PRIOR to exercising this option. You make your downpayment and use traditional financing to make your deal. Now that the deal is yours you can either flip it or hold it. I like the hold option so lets figure out what to do with the CC debt. The object is not to leave this debt on the CC. You need to roll it to some other finance vehicle. Lets assume you bought well, meaning more than 40% equity. If this is the case, refinance the property after obtaining an appraisal. Be careful with refi, some states will only allow you to pull 80% of the total homes value out in equity. Which means if you bought a 100K house at a sale price of 75K, which means you needed 20% down at 15K plus the 5K for repairs. Now your deal had 25K built in equity which is 25% equity. Under some state laws, stating only up to 80% equity pullout, your would only be able to get a maximum of 5% of the equity in the property. This equates to 5K which is not enough to pay off the CC debt. If you bought that same house for say 65K, your DP would be 13K and 5K for repairs. Your built in equty would be 35% minus the 20% mandatory by state, you have 15% to pull out which would be 15K and now you are close to the 18K. So this option is available and easy to use you just need to be careful on your numbers.

Finding an owner who owns the property with no lien on the title would be another way to buy and hold. If no lien exists on the property, then you can purchase the property from the seller with little to no money down and the seller would finance the rest. The you can rent this property out to pay for the mortgage. Making sure the seller doesn't put a clause in the contract about not allowing the property to be rented out is important.

I am out of ideas...see what I can find.


I have to ask you, how you are figuring your formula for Assigning? No wonder why No Investor will buy your paper! Your NOT buying LOW Enough, at least thats what it seems to me, In this market, wait, ESPECIALLY in this market were in, in order to SUCCESSFULLY ASSIGN a deal to a "Buy and Hold" Investor your going to need to adjust your numbers, we are NOT in NORMAL Market conditions, which is what your formula is suggesting, if i were throwing contracts on properties for 75% and Assigning for 80% i would be using "Escape Clauses" left and right. You see, I have 3 Classifications for the Formula's i use: COLD MARKET(which were in), HOT MARKET, and NORMAL MARKET, So, if were in a COLD MARKET, then your Formula SHOULD look like this: BUY @ 45%-65% ARV & FLIP @ 60%-75% ARV, If you buy this way, you should have NO PROBLEM Assigning ANYTHING, and YES you can Buy for these numbers, i'm doing it right now, Cbr's doing it right now, So just adjust the numbers in your Formula and Investors will start Noticing, SULLY



My experience

I built a house for my husband, costing 45,000 dollars, sold 7 years later for 250,000 dollars, bought a 5-family apartment house, ran it for 4 years, clearing 1,000 dollars a month, investing the same amount in renovations and paying off my debt; however, this property burned, leaving me in bankruptcy.Hoping you can find some way to help me out of this situation.