InvestorLoft Real Estate Investing Blog

Creative Real Estate Financing Strategies

Funding your investment property purchases — how do you get it done these days? No one want to tie-up the bulk of their liquidity to pay cash outright and everytime for a portfolio purchase, so where do you turn when traditional financing and mortgage options are more challenging to obtain?

This week’s blog entry focuses on 3 financing thoughts for the “creative real estate investor” out there. We’d love to hear more thoughts from the lending and Agent/Broker communities on how your clients are getting the deal done as well. Feel free to leave a comment below (and gain a valuable linkback to your site!)

1. Self-Directed and Real Estate IRA Funding – With the recent downturn in the equity markets and bonds being…well…bonds, investors are looking for other places to stash their nest eggs for the long-term. Retirement plans rolled-over to a self-directed or real estate IRA custodian will allow investors to use their retirement assets to invest in real estate. The balance of some retirement plans can allow some lucky investors to pay cash lock, stock and barrell for a rental property and enjoy the benefits of long-term cash flow into their IRA. Others can use a portion of their retirement assets to acquire a qualifying property (and yes, there are restrictions on real estate purchases in an IRA) and utilize leverage to finance the remainder of the purchase with a non-recourse loan.
    
2. Non-Recourse Loans – When using your retirement accounts to fund a real estate investment purchase, most investors don’t want to tie-up all of their account’s liquidity in one transaction. That’s where non-recourse loans come in. There are several institutions out there like North American Savings Bank that will finance the balance of qualifying real estate purchases made through your self-directed IRA. Lenders generally require around a 30% downpayment contribution from your IRA and they’ll be looking for specific types of properties (i.e. cash-flow potential residential or commericial real estate, no raw land, farms ot condo-tels), but these lenders specialize in helping you “get the deal done” when you want to diversify your portfolio and place a certain amount of cash in each deal. More information can be found in our educational article on non recourse loans in our Self-Directed IRA Learning Center.
    
3. Ask the Bank – We know it sounds strange, but it’s the most obvious place to start asking questions. Many investors have long-standing relationships with their financial institutions, so why not talk to the folks who watch your money? Most institutions have lending specialist who are familiar with the bank’s entire array of lending products and can look at your particular situation and recommend what the bank would perceive as the best-fit product. What’s the worst that can happen? You leave learning about a new product that can help you meet your goals or you move on to other financing options. A win-win either way.