How to Finance Real Estate Without Using Banks

One of the features of a tight credit economy is that sellers, who would never have considered carrying the financing on the sales of their homes, become much more flexible; and buyers who have been denied access to institutional financing are able to buy a home with seller financing.  Oddly enough, this can create a very lucrative, albeit a different market, for people who understand "paper".

Unless you've got cash resources, when a buyer can't get the cash to pay for a house you've bought, you've got to avoid paying cash for it too.  So, seller financing could just as well be termed buyer financing because you've got to be able to structure financing from the seller that will be attractive to your buyer, or be able to "wrap" it in such a way as to create a profit.

There are several ways to create profit in a non-cash transaction:  One is to pay lower interest when you buy and to charge higher interest when you sell.  Another is to buy at a lower price than you sell at.  Yet another is to trade in something at a high price in partial payment when you buy and to take something in trade at a low price in partial payment when you sell.  One word that sums up all of these approaches is "spread".  Whether your profit comes from a price spread, an interest rate spread, or a trade-in spread, unless there's some kind of spread you won't be making much money.

In addition to various "spreads" that you can build into a deal, there are also spreads in financing costs.  As a rule, sellers rarely even mention such vulgar things as "points", "application fees", "loan origination fees", "warehousing fees", etc., but that doesn't mean you can't tack these on when selling to an end user.

The whole point of this little blurb is that a tight credit market has just as much potential for profit as a loose credit market for those who acquire the knowledge and skill to buy and sell with seller/buyer financing.

Is there any reason why you couldn't do these things in your own market?