Having the ability to fund the purchase of real estate is one of the most important aspects of real estate investing. Without the ability to fund your purchases you are dead in the water.
It is critical as a real estate investor, to not only understand but also to use a variety of funding methods to acquire properties. If you rely on only one method, there may be a point at which it fails you and the deal slips through your hands.
It would be a terrible feeling to know that you have a fantastic deal right in front of you but no way of funding the transaction. To make sure that this never happens to you make sure to look into alternative sources to fund your deals.
In this post I will cover 5 ways that you can use to fund your next real estate investment deal.
Private money can come from a large variety of sources. You can obtain private money from your warm market such as your family, coworkers, friends or even associates.
What is great about private money loans is that you obtain them from an individual (in most cases) rather than an institution. Because of this the terms on the loan are very negotiable.
The private individual lender does not have to follow a set of company rules, guidelines and procedures to lend you the money. It is completely up to you and them to come up with the terms.
This can be the easiest source of funding when it comes from your warm market that already knows and trust you.
Hard money lenders typically run in a similar fashion as a bank but they can be much more flexible with their terms.
These loans are usually very expensive money. These loans come with high interest rates usually between 8-14% plus points
as well. These loans are short-term loans of a year or less.
Hard money lenders focus more on the property itself rather than the credit worthiness of the borrower.
These are great loans for fix and flips. Often times the money for repairs can be built into the loan itself so that you do not have to come out of pocket.
A Self-Directed IRA is an outstanding source of funds to purchase deals. This amazing financial tool allows you to tap into your retirement funds to acquire real estate.
Your self-directed IRA can invest in single family houses, apartment complexes, commercial property, raw land, agricultural land and more.
You can use these funds for many types of real estate investing strategies such as:
Buy and hold rental property
Fix and Flip projects
Fix and Hold
The best part about utilizing your self-directed IRA to invest in real estate is that you can build wealth tax free!
You don’t have to go it alone as a real estate investor. Partnerships can be an invaluable way to take your investing to the next level.
The key to partnerships is finding someone that compliments your strengths and weaknesses. For example, you may be very knowledgeable in real estate investing and have a lot of free time to find great deals but you lack capital and or credit.
There are many people out there with fantastic credit and access to capital but that do not have the time to find deals or the knowledge to invest on their own.
A partner can be used to fill in the gaps of whatever it is you are lacking to purchase that next deal.
If you already own a property or properties you may be able to access some of the equity that has built up over time.
Depending on the amount of equity that you have you may be able to do a cash out refinance to access funds for your next purchase. A HELOC (home equity line of credit) is another way to access your equity.
When choosing this option you must pay close attention to the costs associated with accessing the equity. What will the current interest rate be? How much will you have to pay for closing cost? Factor in all costs involved then decide if this is a good route for you to take.
There you have it, 5 ways that you can use to fund your next real estate deal.
It would be wise to get familiar with these methods and to start building the foundation or relationships needed to use one or more of them. This will help to ensure that you do not have to let a great deal slip through your hands because you didn’t have the funding in place to take advantage of it.
I hope that this post was very helpful to you. If it was, please share with someone who you think may benefit from it.
Here’s to your success!!!
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