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More millionaires have been created through real estate than any other form of investing. Many people are lured by the prospect of escaping the daily rat-race and becoming financially secure through real estate. Most investors, however, give up on the dream due to a lack of money. But creative real estate financing can solve the money shortage problem by using other people’s money. Everyone is familiar with the traditional way of purchasing real estate by putting down 10 to 20 percent of the purchase price and obtaining a mortgage for the balance. The problem with this method is that unless you have more money than the U.S. Mint, eventually you will run out. Another common problem in buying real estate using traditional financing is that the mortgages appear on your personal credit report. It will not take long before you reach a point where lenders will no longer lend to you because of the amount of your mortgage debt. If you want to become a millionaire through real estate, you must find some alternative way to purchase real estate. Creative real estate financing is any method that will allow you to purchase property without using your own money and in most cases your own credit. Let me give you several examples of creative ways to purchase real estate. "Subject-to" is a technique for purchasing a property by taking over payments of the existing homeowner’s mortgage. Example: I recently purchased a single-family home from a property-owner who was a week away from foreclosing. My total out-of-pocket cost to purchase this property was $2,000, and I took over payments on the existing mortgage. Another property I purchased was a small apartment building. The property-owner was burned out and he agreed to sell the property for $15,000 over the outstanding mortgage balance whereby I would be responsible for making the remaining payments. A friend lent me the $15,000 in exchange for a rate of return that was three percentage points higher than the prevailing rate of a two-year bank CD. My total out-of-pocket cost was $1,500 which included the cost of the attorney handling the closing, the inspection, and the appraisal. Last year a multi-family quad building was up for foreclosure and the bank was willing to accept a short sale of $300,000 even though the property was worth $350,000. To obtain a loan on the property I needed a 25 percent down payment of $75,000. A private investor who had money in his Roth IRA agreed to lend me the $75,000 for the down payment in exchange for regular monthly payments with a balloon payment due in two years. The monthly payments to the investor are put in his Roth IRA tax-free. My out-of-pocket cost initially to purchase this property was just $3,000 which covered the closing costs. By using creative real estate financing techniques I was able to get a loan for $350,000 worth of real estate using only $6,500 of my own money for the down payment. So, if you want to become a millionaire more quickly, try creative real estate financing. Creative real estate financing will allow you to become a millionaire more quickly than by using traditional financing.
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