Is Creative Financing Just for Noobs?

Becoming a successful real estate investor doesn’t give you fewer problems; in fact, it gives you bigger, better ones. Yes, I mean better ones.

Not knowing where your next meal is going to come from is a big problem and a bad one. Not knowing how you’re going to finish the 22-story ultra-modern high-rise is a bigger problem, but it’s also a better one. The value of real estate investing is that it allows you to upgrade your problems to more exciting, more high-profile challenges; and with bigger problems come an enhanced ability to solve them based on the knowledge and experience you’ve already gained.

Anybody who believes that creative financing is for investors who took a weekend seminar and doesn’t have two nickels to rub together probably never read a financial paper or built a high-rise. If they had, they would know that most of the funding techniques in this book have been used to purchase and build multimillion-dollar properties throughout the world.

Creative financing isn’t for poor real estate investors; it’s for real estate investors. And at the highest levels of this business, it isn’t the exception; it’s the norm.

Some say that cash is king, but no king of commerce ever became rich by spending his own money all the time. Homebuyers, commercial developers, and part-time investors alike need to know how to structure transactions with creative financing because conventional financing isn’t always available, and sometimes it’s undesirable or unprofitable.

Here is one of the 52 creative financing tips I’ve accumulated over my 25 years buying real estate: (Contact me for the complete set.)

Seller Refi. for Takeover I moved away from home when I was 16 years old, thanks to a lot of help from my father, Charles Parrish. I never did get used to city life; and soon after I was married, I came home one day and my wife told me, “It’s time.”

“What!” I said. “We were careful!”

She wasn’t talking about children. “It’s time we move out. Our tenants have nicer homes than we do.”

So, we found a farm in the country and we fell in love with it. Our budget was $800,000, but the sellers were stuck on $900,000. We couldn’t blame them, it was worth $1,500,000. I couldn’t lose the deal. So, I told the sellers the truth.

“You’re $100,000 over our budget,” I said. “If you can make life easy for me, I’ll agree with your price,” I asked them to refinance their home for the $900,000 subject to a one-time qualified assumption with the release of liability. In other words, they refi., I qualify to assume their mortgage, I take the deed and the debt, and they walk with the cash and no strings attached. Beautiful! “Do you know of any banks that’ll do that?” they asked.

“In fact, I do,” I said.

“Do you think you could qualify to assume the loan?” they asked.

“Actually, I already have,” I answered. I had set it all up in advance through a small local Savings and Loan.

The creative financing tips stop here because the end of the story is a little embarrassing. “This can’t be right,” the title attorney told us there at the settlement table. “I’ve settled I don’t know how many properties for you. How is your wife getting a first-time home-buyer credit?” She was indeed a first time home (not investment property) buyer. “And, Ian, you’re collecting a $27,000 commission for representing her?” Yep. We walked away from the settlement table with a fat check and a brand new farm.

Then I learned how expensive farm equipment is. But that’s another story!

If any of you have questions about this no money down techniques or to acquire all 52 methods, feel free to send me a PM.

Happy investing!

Ian Parrish, President Investors United Baltimore
Contract Engineering

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