Many apartment or would-be apartment investors have come to me to learn how to do creative financing for their various reasons. Nearly all the reasons why a person would need creative financing are because:
• you have little cash
• you cannot obtain a loan due to poor credit or lack thereof
• you desire to leverage what cash or resources you have
• you need short-term seller-financing prior to permanent bank financing
If you do fit into one of those categories, then you’ll be joining a very populous club today. But don’t fret because today’s real estate marketplace is ripe for creative financing.
First of all, how do you find those creative apartment deals? Below, I have listed 5 “owner situations” that are prime for a type of creative financing. If you spot an apartment owner in any these situations, odds are they are ready for someone creative like yourself to come along and help them with their “situation”.
Here are 5 owner “situations” that you should always look for to find creative financing deal opportunities. They’re everywhere!
If you come across a property owner who:
#1 wants to avoid capital gains taxes on profits after a sale
#2 would have to pay a large pre-pay loan penalty if he sells
#3 is ill or has personal circumstances that hinder him from operating the property, causing it to be in poor operating and physical condition
#4 needs to sell the property for whatever reason, but there is no equity in the property
#5 is tired and burnt out and/or if the property is under-performing (distressed)
These are all potential cases for creative financing to take place. Always, always keep your eyes and ears open to theses situations.
On the other hand, if you see within a property listing or hear the following words from brokers or owners, this is an indication that a creatively financed deal can take place as well: “owner motivated”, “seller financing”, “owner will carry”, “master lease option”, “creative offers welcome”, “distressed property”, “bring all offers”, “JV partner wanted”, or “investor wanted”.
A simple way to go online and find hundreds of these deals is to go onto Loopnet.com and enter those key words above into their key word search window.
But when you really get down to it, here is the secret to doing creatively financed deals, no matter how large or small or who you are or where you’re at: You must ASK! That is the secret!!
If you didn’t ask your wife to marry you, you would be married to her. If you didn’t ask your boss for that raise or promotion, you’d be stuck where you were before. You see? That’s where it starts. Therefore, the key to getting and achieving anything greater than what you are today is to…ASK!
How do you apply this to creative financing you say? Easy. First, obtain the owner’s motivation for selling his or her property. Then, construct a creatively financed offer that meets some or all of his or her needs. Then ask the owner by communicating your offer (that’s called asking!). That’s where it all begins my friend. If you don’t ask, you’ll never know. And if you never know, you’ll never grow.
So get out there and ask, ask a lot!
Till next time.