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Analyzing Creative Financing and Loan Strategies
Analyzing Creative Financing and Loan Strategies

Learn how to analyze deals with multiple loans, seller financing, balloon payments, and other financing strategies.

Cindy Bellford avatar
Written by Cindy Bellford
Updated over a week ago

DealCheck allows you to analyze and compare a variety of creative financing and loan scenarios, so you can find the most profitable acquisition strategies when buying investment properties.

This includes analyzing deals with multiple purchase loans, seller financing, balloon loans, and using secondary financing to minimize your upfront cash requirements.

Follow this guide to help you set up some of the more common creative financing scenarios when analyzing rentals, BRRRRs, flips, or commercial properties.

Analyzing Properties With Multiple Loans

You may find yourself in a situation where you will be using multiple loans when purchasing and rehabbing a property.

For example, you may have one loan to finance the purchase price of a property, and a separate loan to finance the rehab costs with a different rate and terms.

DealCheck allows you to add up to 5 purchase loans and configure their types, rates, and terms separately from each other. You can add all of the loans you will be using under Purchase Worksheet > Financing for any of your properties:

Entering multiple purchase loans for a property

After you've set up your loans, you will see their detailed information on the Property Analysis page, as well as in other places like buy & hold projections and reports:

Viewing property analysis with multiple loans

Analyzing Properties With Secondary Financing

You may also find yourself using a primary loan to purchase a property (a 30-year conventional loan, for example), and then using an additional loan to finance some or all of your down payment on the primary loan.

This is a popular strategy for minimizing your out-of-pocket cash requirements and maximizing your return on investment.

In this case, the secondary loan may be a home equity loan, a HELOC, or even a loan from your friends or family.

In any case, you can first add your primary loan under Purchase Worksheet > Financing, then click Add a Loan button below it and enter the secondary loan information as well:

Adding a new purchase loan to a property

DealCheck will automatically calculate all of the loan amounts, your down payment, and total cash needed for you based on your loan settings:

Secondary loan analysis and calculation

Analyzing Properties With Seller Financing

DealCheck can also help you analyze property purchases where the seller will be providing additional financing to you in the form of a seller loan.

If this is the only loan you are going to have, simply enter the seller financing terms under the Financing section of the Purchase Worksheet.

If you are going to use seller financing in addition to other loans, enter each of them and their respective terms in the Financing section:

Analyzing deals with seller financing

Tip: Most seller-financed loans have a balloon payment, so make sure to enter both the loan term and its amortization period if that's the case.

Analyzing Balloon Payment Loans

If you are investing in commercial real estate or using commercial loans to finance your properties, you will most likely find yourself using balloon loans.

These types of amortizing loans typically have shorter terms (5-10 years), and amortization periods that are longer (15+ years). At the end of the loan term, the remaining principal balance will be due, which is known as a "balloon payment".

DealCheck supports balloon loans and allows you to customize the amortization period separately from the loan term.

When setting up these loans, first enter their Loan Term, and then click on the Customize Amortization button below it and enter their Amortization Period, which should be longer than the term:

Customize amortization for balloon loans

When looking at the buy & hold projections or reports for this property, you will see the loan's balloon payment listed in the year when the loan term ends:

Viewing balloon payments in the buy & hold projections

Tip: You will also see balloon payments for interest-only loans like HELOCs when their term ends and their balance needs to be paid off.

Changing the Compound Interval of Loans

If you buy properties outside the United States, you may need to adjust the compound interval (or frequency) used by amortizing loans.

In the US, most amortizing loans are compounded monthly. However, in other countries, they may be compounded every quarter (every 3 months) or twice a year (every 6 months). In Canada, for example, most loans are compounded twice a year.

You can adjust the compound interval for any amortizing loan by clicking the Customize Compounding button below the loan Interest Rate input and then selecting the compound interval of your loan:

Customizing the compounding interval for a loan

Tip: You can save yourself time by updating the compound interval in your property templates, which will apply to all new properties you add in the future.

Note: The above screenshots were taken from our online app, but the same features can be found in our iOS and Android apps as well.

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