March 2, 2016 in Investing In Real Estate
Today's topic is about creative funding strategies. It’s important that you learn how to structure your deals creatively so that closing on a property is never a problem. Your ability to quickly find a way to fund a deal, will likely “make or break” your business in time.
Don’t Be a “One Trick Pony”
Let me ask you this; are you using any creative strategies in your business now? If your answer is no; then why not?
Could you do more real estate deals if banks weren’t your only source of funding?
I’m pretty sure you’ve heard the statement “one trick pony”?
That’s what an investor is that solely on banks for funding his deals. Now don’t get me wrong; there is definitely a place for investor friendly banks. However I can promise you that one day, that door will be closed when you need it. You won’t be able to get a loan.
So what’s the answer to this problem?
It’s learning how to put deals together using creative funding strategies. Think about this for a minute; what if you could double or triple the number of deals you are doing now without using any of your own cash? What would that look like for you? How would that change your business?
Raising Private Money
Raising private money is a big topic, so today I want to touch on that just a little bit.
Let me ask you again; how would it feel to know you could confidently make offers all the time; if you were a true cash buyer?
It would feel pretty awesome wouldn’t it?
Most likely the biggest problem you have as an investor when it comes to raising private money is between your ears. It’s your mindset, and that‘s the first thing you need to work on. It’s critical that you start to think about this process a little differently.
We all hate asking for money. But in reality, you aren’t just asking for money for your deals.
What you are doing is presenting an opportunity to folks that will allow them to partner with you, invest their money in a tangible asset, and earn a great return on their money. In the process they are helping you, and they become your private money partners.
Where Can I Find Private Money Partners?
Private money partners are everywhere, but these are the 3 most common sources.
Your sphere of influence.
Most people start out asking someone they know; friends, family and others folks like their dentist. These are people that move through your daily life. You never know who might have cash sitting in the bank earning next to nothing that has no idea this type of opportunity exists (unless you tell them).
The next source of private money will likely be other real estate investors.
I know that there are deals every month at my REIA meeting on our “deal table” at the back of the room. These sellers will often finance the deal, and it says just that on the flier; “Seller financing available”. Think about it for a minute; why would they do that?
The reason is that it’s good for them. They get rid of an unwanted property, they will get a down payment in most cases, and in this process they create an ongoing stream of passive income. It’s a win-win situation.
The last source of private money is within a group I like to call the “big boys” or the “big fish”.
I personally know people in my city that have done this on a big scale for many years. It’s a big source of passive income for them. Let me be clear here, that they are lending their money to other investors.
Dodd Frank put a whole new set of rules in place when it comes to seller financing, but that is a conversation for another day.
You can also purchase a list of cash buyers around the country from one of the major list sources such as Listsource.
Here Are Just a Few Creative Funding Strategies For Your Toolbox
- How to raise private money
- Conventional vs. Non-conventional loans
- Creative Financing through Institutional Lenders
- The Art of the Wrap
- When (and when not) to take a property “Subject-to”
- How to avoid the “due on sale jail”
- Installment Sale or Lease and Option
- Closing your deal with Transactional Funding
- Hard Money strategies
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