In summary . . .

Alternative forms of financing can help buyers, especially first-time buyers, acquire properties with less cash. But before entering into a high-risk financing arrangement like those described in this chapter, be sure to weigh the potential risks. It is most important to consider poten­tial events that could affect your ability to make monthly payments. In real estate, cash flow is often the factor that determines whether a par­ticular property investment succeeds or fails.

 

Action Steps  

Consider a balloon mortgage if you want to minimize monthly mortgage payments on a property you will hold for 15 or 30 years – definitely less than the amount of time before your final balloon payment is due.

Consider an interest-only mortgage if you are willing to assume a lot of risk buying a property you will keep only a short time and “flip” for a quick profit.

It can be exciting to use owner financing to leverage your way into a building you could not otherwise afford.  But doing so without sound planning and foresight is an invitation to disaster.

If you are a landlord, consider offering rent-to-buy to potential ten­ants. You can even advertise the fact that you are offering to rent your properties on a rent-to-buy basis. It’s an attractive option that can help attract worthy renters to fill your vacant properties.

 

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