Elijah,
When starting out, sometimes it helps to do the most simple option first. It gives you a higher level of confidence and prepares you for something a little more complicated next time.
Depending on if you are using the right bank to finance your deals, the most simple way to creatively finance a deal is to get the seller to finance your down payment.
You mentioned that you didn't have a plan for financing soon enough. It really pays to establish a relationship with a local community bank well in advance of doing a deal. When I first got in touch with the bank that has done nearly all of my deals, I cold called the commercial loan officer, introduced myself, and told him what my goals are. He was more excited than I was!! Some of these little community banks don't get nearly as much excitement as you might think. One of the biggest mistakes beginners make is thinking that you have to have your hat in your hand before approaching a bank.
Remember, to a bank, cash is a liability while loans are ASSETS-- totally the opposite of what each represents for you and I. So when you go to them asking to borrow money, don't have your hat in your hand, just give them confidence that you'll pay your bills and that your word is good. In my experience, the smaller the bank, the better. Peter Lynch once said that if his ultimate stock investment would be sleepy back-woods bank in Louisiana that no one had ever heard of-- I've found the same to be true when looking for funding.
Once you have a relationship established, then you're ready to look for a deal. For a beginner, I would simply look for a motivated seller. I don't know the Iowa market, but I have found motivated sellers on the street and on the MLS. You just have to look.
For many situations, the banks will finance 80% of the deal. Many times they don't care who or what entity owns the other 20% so long as they are the first lien-holder and they KNOW that they can get their money back if they are forced to repo. So the question now is what creative ways can you get that last 20%??
In some cases you can offer to "pay" full asking price for the property, but ask for the seller to make a concession of 10% toward the purchase price. That makes up half of your down payment right there! It doesn't really cost them in terms of "real money" because it is coming out of the total sale price. Asking for them to make a concession of 20% would be pretty difficult in most cases because the bank won't finance a deal where the appraisal comes in below the sale price.
Maybe you can get the seller to conceed 10% and then the remaining 10% he can finance to you for some percentage rate. The last deal I did I paid $0 down. The seller financed the whole 20% to me INTEREST FREE. Did I pay a higher price for the apartment building? Yes, absolutely. WHO CARES?! I bought it using someone else's money. After I obtained control of the property, I started making money from the rent then used the rent to pay the 1st lien holder (the bank) and the 2nd lien holder (the seller).
Hope this gives you some ideas and helps you!!
Jason
