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Creative Finance Real Estate: What Is Creative Finance?

Creative finance = non-traditional deal structures where investors solve problems that banks won’t.

Instead of relying on mortgages or hard money loans, you use:

• Seller financing
• Subto (taking over payments)
• Equity partnerships
• Notes, wraps, and JV deals

As Pace Morby says: “Creative finance solves problems money can’t.”

Why Creative Finance Matters

• Access deals without banks. Bad credit or no W2 income? Still possible.
• Help sellers close. Offer solutions when cash buyers walk away.
• Scale faster. Lock up deals without tying up all your capital.
• Protect profits. Structure deals for long-term cash flow.

Creative Finance Real Estate: Core Creative Finance Strategies

Subject-To (Subto)

Take over existing financing — you make the seller’s payments, deed transfers to you.

• Great for sellers with little/no equity.
• Keeps low interest rates intact.
• Example: Buy a Phoenix house subto with $1,100/mo PITI, rent for $2,000/mo.

Seller Carry Back Financing

Seller acts as the bank. You pay them monthly on a promissory note.

• Works in higher equity situations.
• Often lower down payments than hard money.
• Example: $200k home, seller finances $180k at 4% interest, $20k down.

The Morby Method (Stack Method)

Combine subto + seller carry.

• Subto covers existing mortgage.
• Seller carry covers equity spread.
• Great for high-equity sellers with low-interest existing loans.

We call this the Stack Method because you stack financing layers.

Equity Partnerships

Partner with someone who has cash, credit, or experience.

• Split equity and cash flow.
• Common in multifamily and commercial deals.
• Example: You find deal, partner signs loan, you manage → 70/30 split.

Slow Flips

Inspired by Scott Jelinek and Larry Goins.

• Buy property with long-term financing.
• Seller-finance it to end buyer.
• Collect down payment + monthly cash flow.
• Exit when note pays off.

Your model:

• 10% down from partner.
• JV agreement with 30% equity deferred.
• Servicing company splits cash flow (70/30).

Creative Finance Real Estate: Real-Life Deal Examples

• Texas Subto: Investor took over a $1,200/mo payment on a Houston house. Rented for $2,100. Cash-flowed $900/mo.
• Florida Seller Carry: Retiree sold a $250k home with $25k down, 4% seller note. Buyer flipped 18 months later for $75k profit.
• California Stack Deal: $600k home. $400k subto loan at 3%, $200k seller carry at 5%. Investor made $1,200/mo net cash flow.
• St. Louis Slow Flip: Investor used gap + slow flip funding to buy, then seller-financed out. $12k down, $500/mo cash flow.

As Larry Goins says: “Creative financing isn’t about buying houses — it’s about buying cash flow.”

Creative Finance Real Estate: Risks & Challenges

• Due-on-sale clauses in subto deals.
• Seller trust issues. Must educate them.
• Legal complexity. Requires attorneys/title companies familiar with creative finance.
• Funding gaps. Down payments, repairs, and EMDs still need capital.

Our Solution:

• Provide gap funding for down payments/EMDs.
• Issue POF & liquidity letters to back offers.
• Structure legal JV agreements to protect all parties.
• Fund slow flip models to create long-term income streams.

Best Practices for Creative Finance

• Always disclose clearly with sellers.
• Work with attorneys/title companies familiar with creative structures.
• Combine creative financing with proper funding (gap, transactional, EMD).
• Build a reputation — referrals drive deals.

FAQs about Creative Finance Real Estate