Creative real estate investing is when investors use non-traditional methods to buy or sell a property. It refers to unusual methods for selling or acquiring real estate.
Investors frequently practice many different kinds of creative real estate investing.
Popular Techniques
Seller Financing: This is an unusual real estate investing technique where the property owner offers to finance the buyer. The owner typically lends a portion of the equity to the buyer and receives regular monthly payments. The mode of repayment may differ. It may be a principle only payment and interest may be fixed or variable, all depending on the contract agreed upon by both of them. Sometimes the buyer assumes the seller’s loan, which they write as an all inclusive trust deed. Loans for commercial property are known as assumable loans and residential loans are known as non-assumable. These two techniques are used widely.
Lease Options: This refers to a person signing a lease as well as an option to purchase the leased property within a fixed amount of time. The options usually last for short durations of time like 12 months and the buyer agrees to pay an additional amount as an option fee, which will be forfeited should the option not be carried through. There are lease purchase options that make it mandatory for a buyer to buy the property with the term of the option. The price of the property is fixed at the time of the agreement and no matter what the land value, the buyer must pay the amount stated in the agreement. Sandwich lease options are methods of buying a lease option and immediately selling it to another buyer for a profit, which is shared by the owners.
Other Techniques
When mortgages are defaulted, the owners may try selling the property to the lenders asking them to accept a lesser amount than what is owed in the mortgage.
Another technique is to buy bulk properties from banks and sell them individually for a small profit.
Using tax liens to acquire property is also a creative real estate investing technique. Investors buy tax liens from the government and should the homeowner default, the investor may foreclose on the house.
Some people buy a property that is ugly, old, or unfit, make a few changes to give it a facelift, and sell it for a huge profit.
The chance for being successful by investing in real estate is astounding. With careful planning and creative real estate investing techniques, a person can make a huge profit as well as build a successful career dealing in real estate.
David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site smallbusinessconsultingdotcom