Many people do not understand the liquidity of real estate transactions and are often led to believe that the transaction hinges on the accessibility of cash. In this day and age of a troubled economy, few have such means. The reality is there are other benefits to explore when embarking upon a real estate transaction that has less to do with cash funds and more to do with the existing loan situation. Many homeowners do not see their existing loan as equity building over the years or that their home could work favorably on their behalf. So many people think with a lack of cash, real estate transactions don’t get done but creative thinking is flexible.
Innovative Real Estate Solutions
This is where the know-how and knowledge of real estate professionals and investors must apply creative thinking to the everyday challenges of doing business in such a slow market. While there is creativity thinking and finance involved, there is also the ability to have a tough skin that sets these professionals apart from others. Many real estate investors and seasoned realtors will tell you that access to cash is not always the deciding factor in all real estate conveyances. Many laymen do not see the notion of converting liquidity into part of the equation as being the talent for translating assets into working for the customer as an added benefit.
Adapting to Real Estate
These professionals look at the positive aspects of the deal, which starts with ownership of property and these highlights remain beneficial to the success of the real estate transaction. Still, in this economic environment, the art of creative finance is getting more difficult to complete and this “liquidity crunch” threatens the well-being of an entire industry of mainly commission employees. There are a few left in the game ready for the challenge which may require exploring new avenues and broadening one’s skill set. The idea here is to provide a service many are leaving and help people solve their financial woes. It is not a crime to get paid well for being at the top of your game. Much like Darwin, this is a time of survival of the fittest where many willing to stay in the game can profit.
Redefining Real Estate
Essentially the definition of liquidity in its purest meaning is barter–an exchange of goods, products, services, or even promises- instead of cash. When it comes right down to the essence of the transaction, real estate deals are simply determined by switching benefits between principal parties. Still, the common consumer does not see it this way or is never able to understand the concept as they are so wrapped up in the notion of cash. And maybe this sense of non-understanding carries over sometimes to the real estate professional because many real estate investors fail to completely examine this concept. This makes no sense because this would open up new avenues especially for smaller real estate investors with limited options when it comes to more traditional methods for presenting the best deal for all sides when it comes to mostly investment properties.
Still, even through creative financing, some deals are completed, but it is also possible that many creative finance professionals forget the bottom line and principles behind his or her objectives and the steps needed to attain such success. These deals can be highly stressful and one can easily lose their objectivity and then think that cash on hand is the only way.
Unlocking Real Estate Potential
It seems interesting how even everyday real estate professionals, retail real estate agents, note brokers, and even note investors are wary of so-called creative financing structures that have been transpiring for decades. When seriously many of them are aware such techniques exist. I mean there are hundreds of methods for acquiring real estate–only THREE of which are all cash (cash, cash to the existing Loan, cash to a new loan).
These professionals recognize the benefit of when to use these methods to substitute the need for cash as part of the transaction and this can also result in a spurt of liquidity within the market to spawn more transactions, which generally duplicates desired benefits. Many need to see the beauty of such benefits because it gets the transaction completed, which may not have ordinarily had a chance.
The list below only provides a few examples of such methods available to creative financing specialists. A few are using private notes somewhere in the mix:
- Installment Sales IRC 453
- Pyramid Financing
- Exchanges IRC 1031
- Exchange land only
- Exchange building only
- Sell land only
- Sell building only
- Sale with the option to buy back
- Sale with leaseback
- Sale-leaseback with the option to buy back
- Using trusts, especially Land Trusts
- Wrap-Around Mortgages
Several of these, such as well-crafted Wraps and Pyramids, are effective in that they provide a service when conventional, traditional finance institutions are unable to complete the deal. Additionally, there are many methods to carry out successful selling of privately held owner carry-back notes, that maximize the benefits for all parties, including the basic Split Down and Partial Purchase
Innovative Solutions in Slow Markets
Really when it comes right down to it today’s market is making it necessary for many to see outside the conventional ‘box’ of the deal and this has created a need for the private cash flow industry. This especially pertains to smaller investors and allows them to purchase higher quality notes because the larger financial institutions do not want to bother with them. The best of investors will know the tricks of the trade and simple shortcuts to the deal. I mean sometimes you can use deal structures instead of financing and remain on top of the deal for a sizable profit. It comes down to providing a service many have forgotten about. I mean this is where the niche is right now because the market is so slow and despite what banks have done, people are still going to need the deal done. Creative financing allows dead deals and people with less than great credit to remain in the game.
Even as the market continues and there is more real estate inventory than buyers nationwide, these deals will become more prevalent but still, it is a matter of the real estate professional realizing this fact.
