02 Dec CREPN #69 – Creative Financing with Adam Cohen
A conforming real estate deal has a conforming property, and a conforming buyer. A real estate deal with a hurdle or two, is non conforming. These non conforming deals need creative financing to get the deal done. [x_audio_embed][/x_audio_embed] Adam Cohen, founder of West One International, always sees the opportunity where others do not. He thinks outside of the box. It’s what he’s best at. When it comes to non conforming deals, creative financing is the answer.
What is a non conforming deal that needs creative financing?Properties that have been on the market for too long or have high vacancies, deferred maintenance or management that doesn’t care. Sellers that are tired of owning and want out, or a lender that is ready to let go to cut their losses are all examples of what properties that need creative financing look like.
How does Creative Financing work?Hard money rewards those that can get the needed work done fast. It will crush those who can’t figure out how to get the work done. Hard money lenders charge more than banks, and mostly limit the length of the loan to less than twenty-four months. The additional cost must be considered when creating budgets and profit projections. Creative financing options can provide the needed capital for labor, materials and operating budget shortfalls. Alternative lenders are able to provide the capital quickly. This allows you to acquire the property and make it successful fast. The collapse of the mortgage market flooded the market with distressed single family homes. The money needed by flippers was mostly provided through hard money lenders that are not bound by the same lending standards of regulated banks.
Best Advice to be successful:Do a proper analysis
- Know your margins
- Itemize all your costs
- Map out your transaction
- Have working capital so you can buy right
- Reserve properly for the what if’s
- Line up your contractors a head of your purchase
- Get your calendar set