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Creative financing is innovative home-financing arrangements that help sell a property.
Do creative financing techniques really work? They have probably have all worked somewhere for
someone at least once. The point isn't if they will all work for you. The point is to know what is
possible, so you can find your own creative ways to invest in real estate. Below are several creative financing methods.
Land contracts are a great way to purchase real estate and without using a mortgage company. They are sometimes
called "contract for sale". This means the seller lets you make payments, and delivers the title upon
payment in full. Sometimes sellers will do this because they can charge a higher interest, and higher price.
You can also finance a real estate transaction using hard money lenders. They specialize in short-term
loans at high interest. You typically use this type of financing for real estate you are going to purchase
and sell quickly such as a fixer-upper. Often, you can get
the money fast. The interest rate might be higher than a typical mortgage company but buyers who use this method
normally don't keep the property for a long time and are hoping to turn a quick profit.
Friends and family are a great way to finance real estate if you make sure to keep it all business.
Another method of creative financing are No-doc and low-doc loans. No (or low) documentation of your
income or credit required. Again, you can find banks that do these online now. The catch is that
you will only be able to borrow up to 80% of the purchase price or property value. If you have 10% in
cash, you might be able to borrow the other 10% from a friend or the seller.
 Seller-carried second mortgages. Sometimes a bank will loan you 90%, and allow the seller to
take back a second mortgage from you for 5%, leaving you needing only 5% for a downpayment.
Note buyers. The seller needs cash. He raises the price, and sells to you for $100,000 with no money down,
taking back two mortgages from you for $90,000 and $10,000. He arranged (or you did) for a note buyer
to pay him $80,000 cash for the first mortgage at closing, getting him the cash he wanted. You pay
two payments now, one to each note holder.
Get a loan on other property. Interestingly, if you take out a home equity loan for a vacation, and then
forget to use it for that, you can use it for the downpayment on an investment property, without
violating the rules of the bank that gives you the primary mortgage. In other words, you got in
with no cash of your own.
Partnerships. For bigger projects, you could arrange for five investors to each put money into a partnership, with your share being the management responsibility instead of cash.
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