Whether you’re looking to utilize conventional financing to buy non-owner-occupant investment properties with 15% down payments and PMI, 20% or more without PMI or to use conventional financing with 3% or 5% down to buy owner-occupant properties when utilizing a house hacking or Nomad™ real estate investing strategy… you’ve found the right place.
Watch the class on conventional financing below for detailed information:
Or, use the quick summary to learn about conventional financing options for real estate investors:
Conventional financing isn’t the only financing available to real estate investors. In fact, there are several other options as well covered below.
Creative Financing
There are 6 major categories of creative financing for real estate investors that we cover in detail in the class recording below:
- Owner Financing – Where the seller owns the property free and clear of all mortgages and acts like the bank and allows you to make payments when purchasing the property.
- Wrap Financing – Where the seller finances the property for the purchase by there is still an underlying loan on the property from the seller that is wrapped.
- Loan Assumption – Where you formally assume responsibility for the seller’s loan from the lender.
- Rent-To-Own, Lease-To-Own, Lease-Option, Lease-Purchase – Where you rent or lease the property with the option or purchase contract to be able to buy the property at a later date.
- Agreement-For-Deed, Bond-For-Deed, Contract-For-Deed, Installment Land Contract – A form of seller financing where you make payments and get the deed when you’ve fulfilled your contractual obligations to the seller.
- Subject To – Where the seller deeds you ownership of the property but leaves their existing loan (or other liens) in place and you agree to buy the property
“subject to” the existing financing (and/or other liens).
Here’s a full class video going over utilizing creative financing strategies for real estate investors:
Be careful because some real estate investors incorrectly believe that creative financing means nothing down. Here’s a video discussing that erroneously belief:
Private Money
I consider private money to be different than hard money. Private loans are made by an individual you know that is not in the business of making loans. For example, it could be grandma or your wealthy uncle loaning you money to acquire properties.
Hard money loans are made by professional lenders in the business of making loans on properties that tend to need work.
With private lenders, you’re usually relying on the strength of your relation and trust to qualify for the loan… although the quality of the deal and your strength as a borrower may come into play depending on who the lender is and what you’re able to negotiate.
Hard Money
Some real estate investors are wanting to utilize a real estate investing strategy that would benefit from short-term financing that allows for the purchase of properties that need work and may not qualify for more traditional conventional financing options.
For example, they may wish to buy properties that need work to quickly turn them (fix and flip properties) for short-term capital gains (profit).
Another example is real estate investors wishing to acquire deeply discounted properties—usually in need of work—that they can fix up, put a tenant in and then refinance (usually 12 months later with long-term, fixed rate financing) and keep them as rentals. We often refer to this as the BRRRR strategy which stands for Buy, Rehab, Rent, Refi and Repeat.
Hard money lenders are in the business of making loans of this nature.
They usually look to the quality of the deal including how much equity is in the deal as part of the qualification. It is not uncommon for many hard money lenders to also consider your personal financials before making the loan but you may be able to find a hard money lender that is willing to loan money based solely on the quality of the deal.
Nothing Down Financing Options for Real Estate Investors
Many real estate investors—especially new real estate investors—will be attracted to financing options that don’t require down payments at all. Some of these investors will be seeking this type of financing to amplify their returns by minimizing what they’ve invested. Others may be seeking this type of no down payment financing because they do not have a down payment and still desire to acquire a rental property.
The following class goes over the nothing down financing options for real estate investors:
Low Down Payment Financing Options for Real Estate Investors
Real estate investors will often discover that if they can raise some down payment—even if it is a small down payment—it opens up a much larger number of deals and, additionally, often increases the quality of deals too.
The following class covers the low down payment options available for real estate investors who have managed to save up some down payment:
Buying Investment Properties All Cash
About 1/3 of all properties purchased are purchased for cash as shown in the chart above.
Many real estate investors believe that taking the time to save up the entire purchase price and closing costs and reserves required to buy a rental property will be so much slower than acquiring properties leveraged with reasonable down payments.
It is true that saving up to buy the first property all cash takes a lot longer than saving up 3%, 3.5%, 5%, 15%, 20%, 25% or more down… but after you acquire the first property, the cash flow is significantly better than properties you’ve purchased with loans… especially when you put a small amount down.
This extra cash flow from buying a free and clear property helps you save more quickly for the next property.
The end result is that buying a number of rental properties for all cash is not nearly as slow as you might believe when compared to financing properties and it completely eliminates the ugliness that might come with buying high priced properties with high interest rates in markets where rents have been lagging and therefore cash flow is difficult with reasonable down payments.
See our modeling of comparisons of strategies buying properties with financing to properties without loans for more information.
Analyze Deals Regardless of Financing
Regardless of what type of financing you’re considering, it is critically important that you properly analyze the deal before you buy it. That’s why we provide—free of charge—The Worlds’ Greatest Real Estate Deal Analysis Spreadsheet™.
It is, by far, the best tool for making sure you buy only the best cash flow deals. Use it in combination with our 88 strategies to improve cash flow to make sure you’re buying the best cash flowing deals.
