Creative Financing and Some Things To Know

[Ken M.]

Someone asked for more detail on Creative Finance. I always look at the exit strategy for the property to determine which kind of Creative Finance I would use. Sometimes I actually walk away from the deal - Not All Creative Financing Deals Make Sense.

I use a spreadsheet I developed to determine my entry costs, carrying costs, cash flow, tax write offs, appreciation and exit costs. I can tell in five minutes if it's a deal or not. Don't waste a lot of time analyzing. Make offers, then when someone says they will consider Creative Finance, that's when you make the suggestion. But, know what you want to accomplish beforehand.

Creative Finance is a great way to buy properties when done properly and lawfully.

Some types of Creative Financing include: Seller/Owner Financing, Land Contract, Wrap, Assumption, Subto, Lease Option, Contract for Deed. There are a couple of others less commonly used.

My humble advice to anyone attempting to do creative finance is:

Creative finance is for experienced investors who have access to capital if anything goes wrong.

1. Learn the laws
2. Don't use a contract "off the internet", laws vary by state and are also regulated on a federal level
3. Learn the financing techniques correctly
4. Don’t skip parts of the process
5. Don’t ever do a “kitchen table” closing
6. Use the proper deed
7. An attorney can help you with the legal work, but the rest you are on your own
8. Your guru will not bail you out
9. “Investing” in someone else’s deal by providing a small 2nd loan so the “investor” can pay for “cash to the seller” and for “closing costs” so he can do the deal is a very bad plan
10. Know what problems can arise
11. Learn the responses and solutions to problems before they are needed
12. Know everything there is to know about Title and what that means
13. Know who a "protected class" individual is
14. Learn the "back doors"
15. Learn human nature
16. Understand timelines
17. Understand regulation enforcement (some of these "mistakes" have a 10 year statue of limitations ( they can charge you 10 years AFTER you do the transaction) and carry hefty fines and possible imprisonment
18. The court doesn't accept "I didn't know" for an answer"
19. Know that the source of the lead plays a serious role in some states and federally
20. Know how much of a "profit" pushes the boundaries to invite an investigation
21. You can be sued by the seller if you don’t do things correctly
22. You are automatically at fault if an investigator or attorney or regulator gets involved. You have to prove you did everything right and then because of “empathy” for the poor snook who “fell into you schemes” you may lose anyway.
23. This is a legally binding transaction that will be treated that way by the law. There are regulations
24. I could go on, but if you learn this much, and apply it appropriately, you will cut down your sorrows and risk, considerably.

And yes, there is much more. These things can be taught & learned. It's useful in CA,  AZ, OH, IN, GA, Fl doesn't matter.

[Don Konipol]

Quote from @Ken M.:

Someone asked for more detail on Creative Finance. I always look at the exit strategy for the property to determine which kind of Creative Finance I would use. Sometimes I actually walk away from the deal - Not All Creative Financing Deals Make Sense.

I use a spreadsheet I developed to determine my entry costs, carrying costs, cash flow, tax write offs, appreciation and exit costs. I can tell in five minutes if it's a deal or not. Don't waste a lot of time analyzing. Make offers, then when someone says they will consider Creative Finance, that's when you make the suggestion. But, know what you want to accomplish beforehand.

Creative Finance is a great way to buy properties when done properly and lawfully.

Some types of Creative Financing include: Seller/Owner Financing, Land Contract, Wrap, Assumption, Subto, Lease Option, Contract for Deed. There are a couple of others less commonly used.

My humble advice to anyone attempting to do creative finance is:

Creative finance is for experienced investors who have access to capital if anything goes wrong.

1. Learn the laws
2. Don't use a contract "off the internet", laws vary by state and are also regulated on a federal level
3. Learn the financing techniques correctly
4. Don’t skip parts of the process
5. Don’t ever do a “kitchen table” closing
6. Use the proper deed
7. An attorney can help you with the legal work, but the rest you are on your own
8. Your guru will not bail you out
9. “Investing” in someone else’s deal by providing a small 2nd loan so the “investor” can pay for “cash to the seller” and for “closing costs” so he can do the deal is a very bad plan
10. Know what problems can arise
11. Learn the responses and solutions to problems before they are needed
12. Know everything there is to know about Title and what that means
13. Know who a "protected class" individual is
14. Learn the "back doors"
15. Learn human nature
16. Understand timelines
17. Understand regulation enforcement (some of these "mistakes" have a 10 year statue of limitations ( they can charge you 10 years AFTER you do the transaction) and carry hefty fines and possible imprisonment
18. The court doesn't accept "I didn't know" for an answer"
19. Know that the source of the lead plays a serious role in some states and federally
20. Know how much of a "profit" pushes the boundaries to invite an investigation
21. You can be sued by the seller if you don’t do things correctly
22. You are automatically at fault if an investigator or attorney or regulator gets involved. You have to prove you did everything right and then because of “empathy” for the poor snook who “fell into you schemes” you may lose anyway.
23. This is a legally binding transaction that will be treated that way by the law. There are regulations
24. I could go on, but if you learn this much, and apply it appropriately, you will cut down your sorrows and risk, considerably.

And yes, there is much more. These things can be taught & learned. It's useful in CA,  AZ, OH, IN, GA, Fl doesn't matter.

“Your guru will not bail you out”