Creative Financing Strategies: What’s Working for You Right Now?

Question

What creative financing strategies have you found to be the most effective in today's real estate market, especially in terms of working with sellers or investors in challenging conditions? I'd love to hear specific examples or success stories!

Dennis Knapp · Answer

Hi Scott, I am a new Investor Just starting out in Cleveland also. I am also interested in seller financing but i just wanted to introduce myself and say Hi.

Ellis San Jose · Answer

1)Purchasing distressed property with seller financing with substitution of collateral clause.

2) Wholesale property as-is, then move favorable seller financing to better quality property keeper at below market rate & favorable terms.

Stuart Udis · Answer

@Ellis San Jose  Why would a seller agree to sell their property with seller financing at 0%? Because the real estate is lousy,  its over priced or a combination of both. I consider that a liability,  don't want it on my balance sheet and if I were out of funds I would sit on the sidelines before entertaining that deal.

Ellis San Jose · Answer

You are making erroneous assumptions. What’s that saying about ASSume? Have you ever thought about getting 0% on one property and substituting the collateral to a great property? Btw one of the transactions was on an $800k house in an A area. It had title problems that I fixed and it needed $100k rehab. I now have $300k+ equity plus positive cash flow. Ted Lasso suggests that we be curious instead of judgmental.

Dan H. · Answer

In general, i think Stuart is correct.   A lot of seller financing comes with higher price or is a poor asset.

But “a lot” is not all.

So I suspect you are both correct. @Stuart Udis is discussing what commonly happens.

I have purchase owner financed at below market rate at retail price.  I am making an offer soon that I hope is similar (near retail at slight discount rate) that is class A unit in a vacation market.  The reality is many lower rate offers have a higher price or are $hit properties, but not all.

If you are paying extra for owner financing make sure that the discount rate easily justifies the purchase price.   There is also never a need to purchase a $hit property.

good luck

V.G Jason · Answer

Most creative financing I am doing now is being patient. I look at baseline affordability and edge just barely up. It's decreasing as time goes on, and the sell side is too stubborn to acknowledge it.

So patience is my creativity, and uniqueness. Lots of folks can't be that way.

I won't veer from my qualifications-- quality location, value add opportunity from the get, proper price entry point. There are more deals than there were in all of 2023, yet I have done a fraction. It's not due to pricing, it's due to seller stubbornness and agent gatekeeping. Also not understanding what lowering rates really mean, cannot forget that being also a reason.

Chris Seveney · Answer

@Stuart Udis

I agree. Also what is working today does not mean it’s going to work in a year from now - people can ask multifamily and others how that has worked out for them the past two years

Residential in my mind is going to see some shifts which I see a lot of bad financing “not creative” that they think is creative and it will come back to haunt people

Stuart Udis · Answer

Not creative, but good real estate and traditional financing is almost always better than incredible seller financing terms and lousy real estate. A lot of the creative financing is paired with bad real estate or a bad purchase price but the buyer is hyper focused on the creative financing terms and that's prioritized over the real estate.  It's important to always put the real estate first.

Cameron Green · Answer

@Sturart Udis Personally I've been able to use my network to acquire properties. As investors and yes friends of mine grow their business into very  large commercial properties. Small residential properties seem like a headache for them now so I've been fortunate enough to take them over via things like land contracts and creative financing deals to get them out of those properties. It's just about being creative and solving problems.

Stuart Udis · Answer

@Cameron Green offering seller financing seems counterintuitive to scaling. How do you scale without access to your capital? Seller financing may make sense for some sellers but probably not those looking to scale their portfolio.

Creative Financing Strategies: What’s Working for You Right Now?

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