The real estate market has finally returned to some semblance of normality - and those in the market for a home in the Melbourne area have a lot more properties to choose from than before. To a real estate investor, this sounds like a gold mine - however, if you already own multiple properties, you may need to employ some creative financing methods to be able to snatch up these newly available properties.



If you are of the fix it and flip it school of real estate investors, you probably already know how you will finance your next purchases by using the proceeds from the sale of property which you presently hold. In fact, you may never need to put any cash out again after your first few property sales. But what do you do if you are buying property to rent it out, or if you are not yet investing in real estate on a scale which permits you to finance one purchase with the sale of another property?

All real estate investors know that getting the best deal possible is important. The financing which banks offer is often hardly the best deal out there. Banks also tend to have slow moving gears, which is basically money lost in the mind of a real estate investor.

One good option for creative financing of real estate investments is assuming a loan. This entails simply taking on the loan payments of the current owner. However, for this strategy to work for you, the property in question must have been originally financed with a low interest loan but currently have a high market value.

However, only consider this financing strategy if the interest rate on the current property owner's existing mortgage is lower than the current prime interest rate and his loan agreement does not contain a "due on sale" clause.

Lease options are another good creative financing technique used by real estate investors. Lease options can save a lot of money for investors and works much like a futures option does on the stock market. It's like a rent to own arrangement, but has a deadline. A very small payment is made to the current owner upfront, much like the options premium in stock trading. Basically, what you have bought is the right to rent out this property and the right to sell it at any time up to the expiration date of the contract.

You must make sure that if you enter into such an agreement you have a "Full Right of Assignment" clause in the contract that allows you to sell the property without needing any consent from the current owner. These agreements also come with an obligation placed upon the current owner to sell the property to you at a certain pre-agreed upon price on or before the contract's expiration date. You have the right to end the contract at any time, but if you do that or fail to act by the expiration date you lose your premium and any rent payments you made up to that point.

By thinking outside of the box, you can do very well in real estate investment. It is important to keep in mind your current situation, whatever that is and plan accordingly. An experienced financial advisor can help you to tailor your strategy for your particular strategy.