What is creative financing and how does it work to find housing in 2023?
There’s nothing worse than being a poor kid in a candy store.
When you’re surrounded by all different options of treats but don’t know how to get to them, you start to feel sorry for yourself.
We don’t feel sorry for ourselves here – we work together to understand our options.
Real estate is not like a candy store.
There are so many ways to win here, and sometimes that’s why people don’t get started. When you’re overwhelmed with information, you need someone to tell you which options work best for your sellers and their situations.
So, let’s break down the different creative financing options you’re more likely to use in 2023.
Since creative financing is how you obtain properties outside of the “traditional” financing options, like going to a bank and getting a loan. It's used when someone is looking to buy a property, but can't quite qualify for a traditional loan due to a lack of credit, income, or equity.
Owner financing in 2023
One example of creative financing is owner financing. This is when the seller of a property acts as the lender and provides the financing for the buyer, instead of going to a bank.
This option can be beneficial for both parties as it allows the buyer to purchase a property without going through the traditional lending process, and it allows the seller to sell their property faster.
You’re going to see this a lot more in 2023 because since there isn’t a bank involved here, you can negotiate with the seller at a lower interest rate than the bank would ever be able to offer you. You can offer your seller more money than they’re asking for, which helps them sell their property quickly, and then you don’t pay that interest.
With houses sitting on the market longer, giving your seller more money than they thought they would get so they close the deal also solves their problem of sitting on a property they don’t want anymore.
Lease options in 2023
You might also see lease options this year.
This is when a tenant rents a property for a certain period of time and has the option to purchase the property at the end of the lease. This allows the tenant to build up their credit and save money for a down payment while also giving them the opportunity to purchase the property in the future.
At the end of the lease, you get all the benefits of owner financing with a down payment and a steady flow of cash every month coming in. Sounds nice right?
With typical housing costs rising and the majority of people living paycheck to paycheck, it seems impossible to save any amount of money, let alone 20% of the cost of owning a home.
With a lease option, not only are you paying rent, but that money is going toward a downpayment on the home, so eventually, you can afford it. You’re putting equity in your own pocket as a tenant.
If you’re renting or wanting to invest in real estate…
The point is, creative financing gives you easy choices.
It gives options for those who might not qualify for a traditional loan. It's not always the easiest or most straightforward route, but it can be a great way for someone to get into a property they otherwise wouldn't be able to.
And when you’ve got a community of support like what we have here in SubTo to guide you and explain, you really can’t go wrong with finding housing, helping other people find housing, or investing.