Creative Real Estate Investing
Creative real estate investing is a term that relates to the various ways you can buy or lease property beyond the traditional “find a property, make an offer, arrange a mortgage and take ownership of the property”. Some of the techniques used in this form of investment includes buying foreclosed properties, buying at auction, using equity in one property to finance another, arranging for prior owners to leave finance in the property and other “no money down” techniques.
Another factor in creative real estate investing is where it is possible to combine a rental property investment business with other related business. This can mean becoming a real estate agent, which is a relatively short process and can be a useful tool to have to increase your ability to realize profits in real estate, or perhaps you can combine real estate flipping with a contractors business you already own. The knowledge that you gain through real estate investing is a sellable commodity, and as you become more successful so your advice will become more valuable.
Foreclosures are possibly the best ways of generating a spot of creative real estate investing action. In Texas for example it is possible to pick up housing properties for the cost of a few years worth of overdue property tax. The great thing about these types of properties is that firstly your investment in the property is minimal. In some recent cases houses worth more than $120,000 have been purchased for around $12,000. In some cases the house is sold back to the original owner once the monies owed, and additional costs have been recovered; in other cases the title transfer to the new owner is absolute and due to an clause in Texan law the previous owners are the ones responsible for any outstanding mortgage payments due on their original loan, not you. It pays to do a bit of research on your intended purchase before heading down to the local council steps for the auction of your intended property, but it is still a good way of picking up good property at a really good price.
Using your equity in one property to finance the purchase of another is one of the mainstays of creative real estate investing. This can occur when you buy the first property at below market value; make improvements to the property or increase the value of the property in some other way, and then use the increased equity in the property as security to get money to make a deposit on another property.
1031 property exchanges can be an excellent way of reducing the amount of capital tax made on the sale of a property. If the investor can show that the money from the sale of one type of property is going to be used to purchase another similar property, and the transaction goes through a qualified intermediary, it is possible to defer the paying of capital gains tax on the sale of one property, until after the sale of the subsequent property.