As a real estate investor, you may want to purchase a house, do some renovations on it, and then sell it for a profit. Unfortunately, it is becoming more difficult to get a bank loan for your rehab project. If the banks won’t work with you because your credit scores aren’t high enough, or you don’t have the money for the down payment, you’re going to have to find alternate ways to fund your deal. These alternate ways usually involve working out some type of financial arrangement with the property owner.

Owner financed deals come together when a real estate investor finds a property that is owned by a motivated seller. The motivated seller is willing to work with you because they are eager to sell the property and get on with their life. There are several ways that owner financing can help you get the money you need for your rehab project. One way of doing this is called “sweat equity”. In this scenario, the owner allows you to make repairs on the house, and in return, you don’t have to give a down payment. You receive a credit towards the purchase price for the work that you’ve done.

Another type of owner financing would be something called “fixer-upper lease option”. You would be renting the property with an option to buy it at a later date, usually somewhere between three and five years. In addition, part of your rent would be applied to the principle balance. When you decide to purchase the property for your rehab project, you get conventional financing and pay the seller the balance of the purchase price.

One more option to consider is “short-term balloon financing”. You would make payments directly to the seller for a specified period of time, and then you get financing to pay off the balance. Financing would be necessary since the balloon payment would be due at one time. This is something like lease options, except that you are buying a property from the start instead of just having an option. This gives you time to get the property into better condition for the bank loan. If the owner won’t work with you, ask one of your friends or relatives if they would like to become your partner in the real estate deal. Show them how much they stand to gain if they supply the money for the deal.

The world of real estate investment can be exhilarating and nerve-wracking at the same time. Once you find a property that fits your criteria, the race is on to find the right financing option for your rehab project. With all of the different choices out there, you’ll be able to grow your real estate portfolio in no time.