My Top 5 Creative Financing Strategies

[Christopher Stanis]

Starting with no money in your pocket? Or do you have a little that you would like to stretch and use to buy 5 properties instead of one?  

Here are my top 5 strategies for investing with little to no money of your own into the game: 

1. Mom and Dad

Personal relationships can be great. You may still buy cash for a property, or have 20% down, but who said it has to be your 20%? Example: I'm working with my brother in law on a flip. He had the money in his investments, and we bought a single family rehab home together. I paid 15k a house in Binghamton NY, will probably have 35k into the house, and will set it for around 60k. 

Pros- Easier to get, and they can be lenient on lack of experience. Cons- make you you do your homework, otherwise you might not be welcome at Thanksgiving. 

2. Hard Money

Let's say you have 5k in your name, have a smoking hot deal, and need to come up with the money to buy it. Hard money lenders are the perfect way to go. If the deal is going to make you 50-100% return on the money invested (see above rehab example)- do you care about paying 10-15% on interest rates? I don't. 

How to get hard money: google it. Seriously. Dozens of websites will pop up. BP forums are good too. You may be required to put some money down, and you may get rejected by multiple lenders before finding a good fit. 

3. Credit Cards

What did he say?? That's Crazy- credit cards- that's stupid. 

Maybe. Maybe not. Some people will tell you that it is, but with any strategy, you have to do your homework and plan that if the worst case scenario happens, you're still going to be ok. 

Example- this year, I took out 100k lines of credit on new credit cards using Seed Capital. Of this 100k, I used 25k to purchase my first property- a 7 unit trailer park in disrepair for 125k. The best part- those credit cards are INTEREST FREE until May 2016. I am paying literally nothing to borrow the money for the first 18 months. We should be able to refinance soon, at an improved value of 270-300k. Worst case Scenario- we can't refinance before May, and our tenants rent covers my monthly payments. 

4. Owner Financing

This is beautiful. A LOT of motivated sellers are willing to consider doing this for you. It helps if they're an investor themselves and may be familiar with the idea. Bottom line- you don't know until you ask. 

Example: "Mr seller, we're interested in buying your 29 unit mobile home park. We know you don't really want to own it anymore. Would you still like to make money on the property even without owning it"

I used this strategy to buy second deal this year. We purchased a 29 unit mobile home park- valued at 600k based on their previous tax returns. The sellers are financing it to us at 6% interest, and we only put 30k (5%) down.  10k of which we borrowed from Mom and Dad. Pretty sweet huh?

5. Asking the Seller to make the Downpayment

What? You can do that? Of course- you just have to ask! Then negotiate the terms of the repayment to the seller. This will usually have to be second position to a bank loan. 

Example: "Mr Seller- I'd like to buy this property- but my money is tied up into several other projects right now. Are you willing to make the 20% downpayment to the bank for us? This is how you can make even more money by collecting interest on the property!"

In this case, they should give the downpayment to your lawyer to hold in escrow until the time of closing. The bank gives you a loan, the seller gets paid back all their money and then they get to collect interest on a 20% note on the property! 

I have two more mobile home parks I'm looking at currently- and plan  to ask the sellers to make our downpayment! 

Closing: 

Any of these strategies can work, IF you know what you're doing. I can't emphasize enough- ask yourself "if the worst case scenario happens, can I live with it?" And you should be well on your way!