When you decide to buy single family homes, there are several different ways you can get creative with your financing. Especially if you have less than perfect credit these options may be your only route to owning a fix and flip or a cash flowing investment property.
The problem with conventional financing is that there may be several hoops you have to jump through in order to get your deal to closing. These options below are not only a much easier way to finance your deals but they also don’t have the pre-qualification requirements that traditional financing has.
Private Money. A private lender is an average Joe who has the funds available to offer home loans to real estate investors. The great thing about private lenders is that the financing terms are negotiable. More times than not a private lender does not look at the borrowers credit or debt to income ratio. They are mainly concerned with the numbers on the deal. A private lender can finance a deal in 2-3 days if needed where as your traditional financial institution may need anywhere from 4-6 weeks to close.
Hard Money Lender. A hard money lender is a company that specializes in making private real estate loans to investors. This is very similar to a private lender except you are dealing with a company who specializes in making these private real estate loans as opposed to one individual. Hard money lenders tend to me more expensive than private lenders. As you do more deals with them the financing restrictions may loosen up. Not my first choice of financing but it’s still less red tape to go through than dealing with a large financing institution.
Subject 2 Financing. A subject 2 financing deal is when you can finance your deal through the seller of the home. If there is still a bank loan on the property you can offer to take over the sellers payments for them in exchange for a sales price 6-12 months down the road. This will give you enough time to fix up the property and sell it without having to get a loan to finance the purchase price. This is a great option to finance your deals if you don’t know any private or hard money lenders.