Creative Financing: Tips and Tricks of the Trade

by James L. Hardcastle

If you live in Australia yourself, particularly Victoria, it is hard to be unaware of the boom in property investment which is currently underway. Even if you live on another continent, you may well be aware of this situation. Regardless of where you are, the time to invest in Australian property is now.

To make the most of these investment opportunities, you’ll need to be able to invest in many different properties. You might already know some ways to secure financing for this, at least on a smaller scale. However, if you can use several different creative financing techniques, you could increase the size of your portfolio; going from just a few properties to dozens – and creative financing is the way to do this.

Creative Financing

To get started in this market, there are three important things you’ll need to know. If you’re serious about expanding your investment portfolio, you have to educate yourself about these various financing methods which are out there. I’ll explain these, complete with examples. You’ll also need a financial advisor who can give you some solid advice and personal service.

In order to be successful in property investment and increase your portfolio significantly, creative financing techniques need to be used. Creative financing is a term used by real-estate investors and it refers to non-traditional real-estate financing techniques. These techniques are not commonly used.

Creative financing can help you to buy properties even when you do not have (or are unwilling to use) your own capital to do so. One way of financing your investments is to leverage other people’s money to make your purchases.

Creative Financing Techniques:

Simultaneous Closing: In this technique, the seller receives financing without taking out a mortgage. At closing, the title is transferred to the buyer and the mortgage is simultaneously sold to a note investor for cash.

Subject-To: This is a creative finance technique where the buyer can obtain the title to the property without having to procure a note. The seller of the property in question keeps the existing financing in place – this way, the buyer does not need to pay any of the loan fees or transaction costs. This is akin to assuming a loan; but beware – this is done without the consent of the financial institution which issued the loan (which violates the terms of the original loan).

There are other creative financing techniques available, including – land trusts, private mortgages, hard money loans, owner carry back, seller seconds, credit partners, retirement accounts, 1031 exchanges and many more.

The services of an independent financial advisor can be invaluable here. These professionals can help you in a variety of ways:

They can asses your borrowing capacity.

An advisor has the insight into the lenders guidelines.

Can determine which lender will view your unique situation in a favourable light.

They can save you a lot of time by doing the research for you.

Explores all the options that are available to you and can help present the right ones for you to choose from.

Provide a range of products and resources you may not be aware of.

They can streamline the loan process for you.

They look after your interests and help you avoid lending traps.

Helps you even after the loan process is complete

These advisors offer personalised service.

They can show you techniques which will save you a lot of money in the long run.

Using the services of an independent financial advisor can give you access to resources which the lenders won’t tell you about. These creative financing techniques can have you quickly adding to your investment portfolio.

If you want to get in on the boom in property investment here in Australia, you’ll need to get up to speed on creative financing techniques, get the advice of a financial advisor and then begin working to really beef up your investments. You could go from just a few properties to more than twenty in the space of a couple of years.

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