How to Fund Your Real Estate Investments
So i imagine that for most of you, funding your real estate deals may be your biggest hurdle. You think that because you dont have 30,000 you wont be able to put a down payment down on a rental or you dont have a 100,000 so you can fund a complete flip. Well I agree with you that having your finance in order is a very important part of the process. There are different ways for you to get the money you need to fund the deals you would like to do. Today, I want to discuss different ways you can go about finding money to help you get involved in real estate investing.
Depending on the investment strategy that you choose, using conventional lenders may be a good option. Remember, that there are small local banks within your area that need you just as much as you need them. So, if you are looking for conventional loans, start with the smaller banks. Also, remember that relationship you build with the lender is very important. They have the ability to choose who they give loans to, so if they like you, you may have an edge. Also make sure you come to the bank with the numbers laid out so you can convince these lenders that your investment is a good risk.
Hard Money Lenders
Hard money lenders are becoming a more prominent way to get your funding for your real estate investments. Do your research on what private lenders expect, the rates they will charge you, who has experience in lending to real estate investors, what terms they will charge you. There are many questions that you need to have answered. Private money lenders are usually more willing to give out loans than banks and are good way to fund flips, but I would make sure you have a couple under your belt before you go this route. The reason being is they will charge you high rates and shitty terms and usually have a balloon payment in 5-6 months, meaning you need to have the house sold and there money back in 5-6 months.
Finding A Partner
Finding a partner to help out with your flips or investments can mean one of a couple things. A partner can be someone who puts up half of the money for a flip and you put up the other half and depending on who does more actualy work you divide the profit proportionally. Another way to use a partner is to find somebody that will fund your investment 100% and the only thing they will be doing is giving you the money. These investors will expect a 50% return on there money since they are funding the whole deal. Finding investors to fund 100% of the deal is difficult but is the best way to go if you are just starting out.
Private Money Lenders
Private money lenders can just be anyone that you know. It could be your friends, family, co workers, boss or anyone you know with money who is looking to diversify there investment portfolio. Just like with anything be sure that you have a solid plan put together before you meet with these folks and see if you will be able to invest their money. What most new private investors don't know is that there are other options for them to invest their retirement money. So when you talk to them about investing, they may not even think about their retirement accounts like 401(k)s or IRAs that can be rolled over with real estate as the investment vehicle. As long as the transfer of those funds is done correctly, that money can be used to fuel your investments with zero tax penalty to them.
Although we touched on 4 of the most popular ways that you can invest in real estate, get creative. There are 100's of different ways that you can mix and match scenarios where you can raise the money to fund your deals. Ill tell you what, focus on getting GREAT deals and you will have no problem findinng money. Investors/ people are always looking for new places to put there money where there is not a lot of risk involved. So go out and find some deals that no one can turn down and the money will come to you.