real estate
5 ways to finance 'bargain' properties

With loans ranging in size from about $1,000 to $25,000, Prosper isn't a place for financing a mortgage. However, as banks grow more reluctant to extend mortgages to borrowers without up-front cash, members are using the marketplace for down payments. "It's a very fast equity builder, if you can handle the payments," says Larsen, who says Prosper probably works best for homebuyers with higher incomes, since loans get paid back within three years.

5. Split it up: When financing a whole building proves too difficult, try getting part of one. That's what buyers in high-priced markets like San Francisco are doing. With a local median home price of just under $600,000, most prospective property buyers in the San Francisco Bay Area can't afford a standard condominium, let alone a single-family home. High costs have led to the rise of an ownership structure called a tenancy-in-common, or TIC, in which homebuyers purchase a share of a multi-unit building. Typically, buyers either share a mortgage or take out individual loans. This unorthodox approach commonly results in units selling for below-market rates. The split-it-up technique is by no means limited to expensive urban areas. In communities across the country, buyers find that while they may not be able to independently finance a single-family home, splitting a duplex or other multi-unit property can be affordable.

Don't force it
If no one wants to lend to you, there may be a good reason. Perhaps the property you covet isn't the great buy it first seemed to be. Damage discovered during a site inspection, deteriorating local real estate market conditions, or a purchase price that's higher than what you can realistically afford are all sound reasons to walk away even from what seems like a screaming deal.

Much like bargain-hunters at a post-holiday clearance sale, real estate investors in beaten-down markets are eager to scout for deals. After the initial enthusiasm wears off, however, investors, just like shoppers, may start to wonder if there's a reason why certain items wound up on the deep discount rack.

"Yes, the market is down, and yes, there is potential for deals," says James Wiedemer, a Houston-area real estate attorney who specializes in foreclosures. "But I think buyers get carried away with the idea that they can buy some nice little foreclosure at 20 percent below market. It's hard to get something below market."

Joanna Glasner is a freelance writer in California.

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