How Investors Finance Their Real Estate Deals
Most people think that you have to have money to make money in the real estate investing game. In order to be a successful real estate investor you don’t necessarily have to have money in the first place. It’s nice to know that you have available funds in your account. However if youre like most people then you don’t have your own funds. Therefore its imperative that you MUST get access to other peoples money. Can you imagine having THE deal of a lifetime but not being able to close on the property? This is the number one reason why people cannot get started in the real estate investing game. People simply do not have access to funds.
Funding from other people can come in many different forms. An investor can get their hands on money one of two ways. There is the traditional way and the nontraditional way. Here is a breakdown of the two types of funding. Most people are familiar with the traditional way of real estate financing. A traditional way of financing real estate is through FHA VA Fannie Mae and Freddie Mac loans. Buyers consider these as “main stream” loans. The majority of time these lenders will loan up to somewhere around 85 to 90 of the appraised value depending on other factors such as credit score appraisal amp; condition of the property. Most of the financing done by traditional lending is amortized over 15 20 or 30 years.
In opposition to traditional financing there is more than one way to get a deal funded by nontraditional ways. For simplicity sake here are a few: 1 lines of credit 2 hard money and 3 private money. Real estate investors today have been know to use all three of the fore mentioned nontraditional ways to get a deal financed. More specifically a line of credit can be money that the investor usually has the quickest access to. For instance credit cards are a form of credit that can be used to quick transactions. Now keep in mind that credit cards provide some of the worst terms; however they are convenient and fast. Another example of a line of credit is a personal loan. Lending institutions can provide individuals with personal loans that can be used to purchase real estate. Often times a check from the personal loan account can be written to purchase a property. As with credit cards personal loans provide some less than favorable terms; however they to are convenient and fast. A second method for financing real estate purchases is through the use of hard money. These lenders can lend money to purchase the property itself. Oftentimes if the investor buys the property at a favorable price then there will be enough money in the transaction to finance some if not all of the rehab project. You must be asking “Whats the catch?” The catch is that these lenders have loans for a short amount of time with a relatively high price of borrowing. The final source of money for funding real estate purchases is through private money. A private lender can be pretty much anyone that wants to loan the investor money. This can be: 1 another investors 2 a friends or 3 a family members. The terms can be stringent or whatever that is mutually agreed upon.
We at Roberts Investment Properties LLC want to see real estate investors succeed. It does matter if your business is in Portland Maine or Knoxville Tennessee these techniques will work for you. Our goal is to help others learn from some of the pitfalls that even advanced investors still make to this day.
About the writer: ”You can have everything in life you want if you will just help other people get what they want.” Zig Ziglar
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