Home » Real Estate

Non Conventional Real Estate Financing

Apr 18, 2008
Unquestionably real estate is a big money business. If you are a quick turn real estate entrepreneur determined to be in the game for the long haul, it should not involve your money, however. Understanding financing is an important part of playing the game of real estate well and of designing an enduring business.

The most commonly conceived mode of real estate financing is conventional. This typically means a 30 year mortgage acquired through a mortgage broker or institutional lender. This subject is mainly important for your buyers, or for you if you also work as a loan officer.

There's really no good reason you should use conventional financing yourself, with all of the tricks you should know. The exception might be if you are a portfolio investor and are refinancing your properties, or if you are purchasing commercial properties. Generally, the best way to take out conventional financing is any way but in your own name. Qualification is based on the borrower's income, assets, and credit profile, and requires a personal guarantee of repayment. There are much better positions you could be in as an investor.

The alternative financing methods might be referred to as nonconventional. These would include the methods of raising cash traditionally used by investors, generally known as hard money and private money. Hard money is typically intended for the acquisition of rehab properties. It has a high interest rate, a low loan to value ratio, and usually a short term balloon note of six months or a year.

Private money just means money borrowed from a private individual, and can come from a person's savings or retirement fund, according to whatever terms you negotiate. Qualifying for these types of financing doesn't necessarily involve your credit profile or financial status, but rather the terms and quality of the deal and your relationship with the lender. To acquire them you will have to present a deal to the lender that they will feel safe investing in.

There is a third category of financing, which might be called creative financing and which consists of other types that don't fit into the previous two categories. One example is subject to financing, which is just the lingo for taking over the existing payments when you take control of a property.

You will acquire the property by deed and bring and keep the mortgage payments current, but the loan will stay in the name of the original borrower. This is basically the safest form of financing ever invented.

A second type of creative financing is seller financing, where the seller of the property carries back a mortgage. This may only be used to partially fund the transaction, perhaps as a second mortgage, or the seller may carry everything but the down payment. And finally, some investors now teach about how to obtain and use business lines of credit for real estate investing purposes. Capital in the form of business lines of credit and business loans is readily available to all new businesses with effective leadership.

Don't consider this article exhaustive, because new techniques of financing are always waiting to be invented. This is an area of real estate where cleverness and creativity can unlock many doors.
About the Author
Omar Johnson is a successful real estate investor and author of the home study course "Secrets To Making Big Money In Real Estate With Little Cash and No Credit" For more info visit http://www.gettingrichinrealestate.com
Rating:
Please Rate:
(Average: Not rated)
Views: 130
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Accounting
    • Credit
    • Currency Trading
    • Debt Consolidation
    • Insurance
    • Investing
    • Leasing
    • Loans
    • Mortgage
    • Mutual Funds
    • Personal Finance
    • Stock Market
    • Structured Settlements
    • Taxes
    • Wealth Building
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources