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Real-Estate-Funding CripticsReal-estate-funding starts with finding the right property and negotiating the best terms for the property being purchased. When buying real property, reducing real-estate-funding costs will enhance your equity position. The following are key points to consider:
• No or low down payment • Seller take back and second mortgage financing • Balloon payments in 5 or 10 years (longer, if possible) • No points to be paid • Closing costs paid by the seller • Principal payments only option • Low interest rate on notes • Right to assign property • Defer payments • Interest only payments (increase rental property cash flow) • Subordination of debt • Collateral substitution • Trade of assets for property • Negotiate reduction in commissions. • Extend payments • No interest for as long as possible • Simple interest for a period of time • Right of first refusal • Negotiate or find refinancing to reduce monthly payment (The converse applies when selling property.)
Real-Estate-Funding Sources • Income from your job, business or investments • Family and friends • Banks or finance companies • Borrow against an insurance policy • Borrow against 401K • Credit unions • Employer advance • Inheritance • Personal note • Credit cards • Compensating balances • Buy at discount and trade to full value • Deep discounted bonds Access the Equity in Your Home Interest only payments (increase rental property cash flow) • Subordination of debt • Collateral substitution • Trade of assets for property • Negotiate reduction in commissions. • Extend payments • No interest for as long as possible • Simple interest for a period of time • Right of first refusal • Negotiate or find refinancing to reduce monthly payment (The converse applies when selling property.) Real Estate Funding Sources • Income from your job, business or investments • Family and friends • Banks or finance companies • Borrow against an insurance policy • Borrow against 401K • Credit unions • Employer advance • Inheritance • Personal note • Credit cards • Compensating balances • Buy at discount and trade to full value • Deep discounted bonds Access the Equity in Your Home A common real estate funding strategy is using the equity in your home as a source of capital. Most lenders will give lower rates to homeowners, often one or two percentage points above prime. Securing a line of credit or borrowing against equity in your own home is better than securing new financing. Lenders will allow you to borrow up to 80% of the equity in your property. Existing Mortgage Or Discounted Mortgage as Collateral An existing mortgage can be used as collateral on properties you are planning to purchase. A good example is a $20,000 second mortgage that you found that you negotiated to purchase for $10,000 ( factoring) The property should be of acceptable quality and the note is seasoned (one year or older) with a good payment history. Reserve it for 60 days (with right of first refusal). Use it as a $20,000 down payment or as part of the financing where the $10,000 could be given to the seller as part of the structured offer. Build Up Positive Cash Flow If you own rental property with a positive cash flow, consider using your positive cash flow. If the property has a $500/month positive cash flow, you can wait for a year and put $6,000 down on a new property or borrow $6,000 now and use the $500/month plus positive cash flow from the property to repay the loan. The loan is secured by the cash flow of the first property and you are putting your money to work immediately. Sell One Property To Purchase Another Take the equity from one property, and re-invest in other positive cash flow producing properties.
Find real-estate-funding options.
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