Investor Strategies and Finance Options

Fix and Flip

House flipping consists of purchasing a property in need of repairs for a discount, renovating it, and selling it for a profit within a short time.

Benefits Include:

• Higher profit margins can be made quickly
• Control over the whole process
• Neighborhood revitalization
• Developing a knowledge of buyer needs

Buy and Hold

A passive investment strategy where an investor purchases a property with the intention of holding for a certain amount of time. Investors can financially benefit in many ways such as:

• Tax savings through depreciation
• Property value appreciation
• Rental income

Seller Financing

Seller agrees to sell the property with little or no money down and then carries the balance owed in the form of seller-finance loan.

Benefits Include:

• Save money on closing costs, lawyer and agent fees, taxes, etc.
• Can negotiate a more favorable repayment schedule, interest rate, and other terms or conditions of the loan
• Great option if you have poor credit and can’t obtain traditional financing
• Avoid appraisals, inspections, title insurance
• Can often purchase with little or no money down

Subject-to or “Sub-to”

With this strategy you will take over the existing loan payments that are already in place.

Benefits include:

• Lower interest rates
• Reduces the cost to buy the home due to no closing costs, originations fees, agent fees, etc.
• Great option if you have poor credit

Hybrid Model

With this approach you would take over the existing mortgage payments of a property (aka subject-to) and then pay the remaining balance of the purchase price to the seller over time (aka seller financing).

Once again, everything is negotiable, so you will be able to get more favorable terms and conditions on the loan.

Lease Option

This is basically a rent-to-own contract that allows you to lease the property for a specific time with the exclusive option to purchase the property

Benefits include:

• If home values are rising, you lock in today’s price and buy later
• Rent credits force you to save a down payment
• You avoid annual rental price increases
• You can purchase even if you don’t qualify for a traditional mortgage

Wrap

A wrap involves getting your sub-to, seller finance, or hybrid deal as a wrap. This is a good option if you’ve decided to forgo fixing and flipping or buying and holding.

You would be getting a property that is re-wrapped with new terms.

Novation Agreement

This is a new agreement that transfers contractual obligations or rights from you to a new person

The novation agreement would replace all legally binding obligations with new terms such as finding a new tenant to take over a lease

You would use this if wanted to purchase the home to flip it but wanted the seller to hold the note while you renovate it to save money by avoiding closing twice