subject: The Role Of Creative Financing In Subject-to Investing [print this page] When it comes to subject-to investing, a legitimate argument can certainly be made that the whole thing, from start to finish, could be considered creative financing. Creative financing is a term used to describe any type of financing that falls outside the traditional lending process (find a lender, show them your credit score/employment record/pay stubs/etc. and then wait for them to determine if/how much they will lend you and what rate). Given that subject-to investing basically involves taking over someone elses loan who has already done that and not ever really notifying the lender that someone else is now making the payments, thats pretty creative.
However, at this point in time, thanks to many, many real estate investorsseminars, gurus and experts, subject-to investing is nearly conventional in many forums, including this one. I expect you all are quite familiar with the process even if it is not your real estate investing strategy of choice. However, given the current market, state of the economy and uncertain status of the credit crunch, I believe that creative subject-to investing is something that we should all investigate.
We gave a very basic description of traditional lending and of traditional subject-to investing above. The topic is much more complicated, and I dont recommend that you head out to do a subject-to transaction based solely on the first paragraph of this article. However, it will serve as an introduction so that we can get on to the good stuff. In the past, generally in a subject-to transaction the seller received some type of down payment in return for handing over his or her mortgage and credit score to the buyer. In the present economy, cash is tight, and you may not have thousands of dollars on hand to purchase a subject-to property even if the payoff is well worth the initial investment.
As a result, many buyers are finding new and innovative ways to make the deal attractive to motivated sellers in other manners:
1.You do not have to offer any money at all:
Many people just need out so badly that they will take you up on your offer just to avoid a short sale or foreclosure.
2.You can pay in installments:
This brings seller-financing into the mix in a totally new way, but it is working for many subject-to buyers.
3.You can offer the seller other services:
If you are a real estate investor, then you may have some unique skills to offer other than cold, hard cash. For example, if you have access to other buyers and you are working with another investor, if you help them shed some of their other excess properties, they may be more than happy to let go of an extra one at a discount to get the burden off their books.
4.Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com
