creative finance

The market around the country has faced some unique challenges as of late. I have really been thinking about what has contributed to the slow down in real estate. I have also tried to determine what has contributed to the slow down in investor’s actions.

As far as I have been able to tell with my research, the single biggest cause of our slowdown has been the crisis in the mortgage industry. Mortgages the last couple years (before this year) were given out far too liberally. Products were create to get people in homes and properties that were not ready for the responsibility of ownership. Lenders gave loans to people that they had to suspect couldn’t handle the debt service of their loans. Especially considering the adjustable rate mortgages, prepayment penalties, historically low consumer credit scores and little or no money down products being given.

The free-lending practices combined with available housing and decent interest rates set America on fire. Prices escalated incredibly around the country. The euphoria helped to cause an unsubstantiated increase in value causing many to buy in a market that was doomed to have the bottom fall out. Sure enough, as adjustable rate mortgages increased payments and the market began to fall, owners were not able any longer make their payments or refinance to get a fixed mortgage at an affordable payment. The foreclosures began.

Foreclosures have continued at an alarming rate causing a banking crisis that we probably haven’t seen the equal of since the Carter-lead interest rate problems of the late Seventies and early Eighties. The difference is that in the high interest days, banks still wanted to lend but borrowers couldn’t justify the high mortgage payments. Today, banks don’t seem to want to lend.

I find it amazing that an industry that makes money lending doesn’t want to lend anymore. We have watched them transition from being far too liberal to far too conservative over the last 6+ months. Essentially, far too many people could get mortgages before and far too few can get them now. I personally believe that lending is what got bankers into this mess and lending is what is going to get bankers out of this mess.

If we look back to the aforementioned Eighties crisis, a technique emerged and became extremely prominent in the real estate market place. That was seller financing. Banks couldn’t lend due to rates so sellers became the banks. I am mentioning this because the market today is another prime example of a situation where people can’t or won’t get traditional financing. Those that are able to seller finance, as a buyer or seller, will have opportunities for success on a level not seen in over 20+ years in the real estate industry.

The question isn’t whether seller financing will become a predominant part of today’s real estate landscape. The question is whether or not you will participate in this amazing technique and the success offered by today’s market place. Seller financing is just one of the amazing factors that I believe will be a hugely successful investing environment. Below is a list of some of the factors I will be focusing on in my blog that will cause great success for those that still want to practice profitable investing.

1. Meeting seller’s needs in seller financing

2. Creating mortgages without the banking industry

3. Making those mortgages “recyclable”

4. Capital raising

5. Taking advantage of deep discounts in the market place

6. Utilizing falling construction costs

7. Capitalizing on ever-increasing rents

I hope you follow along as I discuss each of these opportunities over the next several weeks.

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