Creative Financing Real Estate Financing Strategies WHEN to Use, and When to NOT! Courtesy of Epic Real Estate

Creative Financing Real Estate Financing Strategies WHEN to Use, and When to NOT! Courtesy of Epic Real Estate Creative financing for real estate investors is an advantage most people that sell or purchase real estate don’t understand, and as a result… constantly leave money on the table. There are, however, ideal times to use certain strategies, and times to NOT. **Use this Epic Cheat Sheet as a quick reference guide. **For detailed implementation of these creative strategies, view short FREE lessons at CreativeFinancing.us Creative Financing Strategy #1 Equity Sharing • A/K/A: Joint Venture, Partnership, Membership, Syndication, Shareholding, among other terms. • Often Appropriate When: o You have friends, family or organizations with capital available for investing in real estate and THEY don’t particularly want to dirty their hands with rehabbing or being a landlord. • It’s typically a good idea to AVOID when: o Dealing with the Seller’s personal residence. If you must share equity with the Seller in this situation, word it in your agreement as deferred interest as opposed to equity. Creative Financing Strategy #2 Option… is when you place a contract on a property that gives you the RIGHT to purchase the property for a pre-determined PRICE within a pre-determined TIME, but you do NOT have the obligation to purchase. • Often Appropriate When: o You may not want to take title to the property to avoid liability. o You want to purchase the property in the future for any number of reasons, but don’t want to make the financial commitment right away. • It’s typically a good idea to AVOID when: o Putting down a large amount of money for the option fee when you have less than a 90% certainty of following through, since the option fee is almost always non-refundable. Creative Financing Strategy #3 Option with a Lease • A/K/A: Lease Option or Rent-to-Own • Often Appropriate When: o Seller is motivated to act quickly. o Seller wants to maintain the tax advantages that accompany the property. o Seller wants to keep the property in his/her asset column. • It’s typically a good idea to AVOID when: o Combining the Option and Lease into one Agreement. o Leasing back to the original “owner occupant” Seller. Creative Financing Strategy #4 Subject-To • A/K/A: Buying Subject to Existing Financing. • Often Appropriate When: o Seller must sell fast. o Seller trusts you (and you are worthy of that trust). o You have too many mortgage loans and you can’t get another. o Seller has difficulty selling traditionally,. o Seller is in arrears on mortgage payments. o Property is in heavy disrepair. • It’s typically a good idea to AVOID when: o Selling or leasing back to the “owner occupant” Seller. o There is a balloon payment or an interest rate adjustment coming soon that could cause financial distress for YOU. o Existing mortgage puts you in an upside down cash flow or equity situation. Creative Financing and Strategy #5 Agreement for Deed • A/K/A: Land Contract, Contract for Deed, Agreement for Bond, Buying on Contract, Installment Sale, Seller Financed… there are a lot of AKA’s for this one. • Often Appropriate When: o Seller is concerned about the “due on sale” clause in a subject to transaction. o Seller wants to maintain some property ownership rights until paid in full. • It’s typically a good idea to AVOID when: o Seller is in extreme financial trouble (i.e. job loss, facing bankruptcy or divorce). o Seller will not sign deed in advance and leave with a 3rd party escrow company during the Agreement’s term. Creative Financing Strategy #6 Seller Carry-Back Mortgage • A/K/A: Private Mortgage, Seller Financed, Seller Carry Back, Owner Carry • Often Appropriate When: o Seller wants a specific market value price but is flexible in how they receive it. o Seller has no better investment options and likes the idea of a fixed rate of return over a long period of time. • It’s typically a good idea to AVOID when: o Seller will not provide a title insurance policy clearing all items to which you object. Creative Financing Strategy #7 Wrap Around Mortgage • A/K/A: Wrap, All Inclusive Wrap Around Mortgage, All Inclusive Wrap Around Trust Deed, AITD, and Seller Carry-Back Wrap • Often Appropriate When: o Seller has a low balance on their existing loan compared to the property value. o Interest rate on the Seller’s loan is low. o Existing loan has been seasoned. o Seller has no better investment options and likes the idea of a fixed rate of return over time. • It’s typically a good idea to AVOID when: o A balloon payment is coming due that you’re not prepared for. o An interest rate adjustment is coming soon that will negatively impact payment. Creative Financing Strategy #8 IRA Investing • A/K/A: Self-Directed Individual Retirement Account Investing, HSA Investing, Self-Directed 401K Investing, and there are other investment vehicles that may apply. • Often Appropriate When: o Seller will discount the price deeply for cash. o Property needs a lot of repairs. o Property has potentially great cashflow. o Seller is willing to do any of the above strategies non-recourse. • It’s typically a good idea to AVOID when: o Transaction or property is accompanied by inordinate risk. o You need the profit(s) or cash flow before your retirement age. Creative Financing Strategy #9 Private Money Loan • A/K/A: Private Money, Hard Money Loan, Private Mortgage, Private Trust Deed, among other terms. • Often Appropriate When: o Seller will discount the price deeply for cash. o Property needs a lot of repairs. o You have friends, family or organizations with capital available for investing in real estate and they don’t particularly want to dirty their hands with rehabbing or being a landlord. • It’s typically a good idea to AVOID when: o Transaction or property is accompanied by inordinate risk that may ruin the private money relationship for future opportunities. .

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