How to Get Money to Start Real Estate Investing
Many people are looking for money to start real estate investing.
There are many opportunities in this market to find very good deals.
The trick is to find the money to fund these deals.
Probably the most obvious is seller financing.
Seller financing is the easiest type of financing.
It usually but not always involves very little in closing costs and no credit check.
You can also negotiate with the seller for low or no interest and also arrange to have no payments for a specified amount of time.
With this type of financing, you can create a win/win situation for both you and the seller.
The seller is able to earn interest on the note created and sell their property, and you can get into a great deal with terms that you can live with.
Many people can also get financing via the traditional investor mortgage.
With today's current economic climate however, there is usually a higher down payment (10- 20%+) and higher personal credit score required than in years past.
Also, there is often a limit on the number of mortgages you can have in your name.
Another idea is to take over the property subject to the existing financing.
Basically, the loan is left in place, and you start making the payments.
There is a risk however that a loan may be called due if this is discovered by the mortgage company.
Not real common, but could happen.
Best way to alleviate this is to set up escrow through a title company that disburses the checks.
I am nowhere near an authority on this subject, but there are many real estate gurus that teach this type of technique.
It is very effective for saving someone's credit who is facing foreclosure and wanting to move.
You can make up the back payments, and have a good property to either rent or sell.
Hard money or private money loans are another good source of funds if the deal is good enough.
A hard money lender will often lend 60 - 70% of the after repaired value.
Often you may have to pay 2-5 points up front, and up to high double digit interest rates(14-18%).
But if the money is only needed for a short time, and the total of the sales price minus the cost of repairs, cost of money, and cost of property still leaves you with a good profit, then this is a good option to explore.
ALWAYS make sure that you allow an overage for the repairs.
If you anticipate repairs of 15K, then it might be a good idea to run your numbers on $20k of repairs.
If a hard money lender turns down a deal, you had better analyze that deal again.
Hard money lenders are protected by the loan to value of the property.
If they don't want to fund your deal.
there is probably something that you are overlooking.
There are a wealth of hard money lenders out there.
As you build relationships and prove yourself with these lenders, you can often get better terms.
You could also joint venture with a private money lender.
These are individuals who will fund the entire project for a piece of the deal.
Often, that piece of the deal is very high.
It can be a great way to get started real estate investing though.
It also takes the pressure off if you are just starting out, because you will not have to worry about making mortgage payments while the property is being fixed and awaiting either a buyer or renter.
By starting a real estate investing company, you could then build business credit to help finance your deals.
The unsecured business credit will not show on your personal credit, and thus not handicap your ability to fund your deals via the above mentioned ways of financing.
By building business lines of credit, you will be able to build more credit ($300K -$500K), in a much shorter time than you could using your personal credit.
Oftentimes, this credit is at lower rates than you could get personally.
By raising this kind of credit available, you have more options when you are trying to acquire properties.
There are many opportunities in this market to find very good deals.
The trick is to find the money to fund these deals.
Probably the most obvious is seller financing.
Seller financing is the easiest type of financing.
It usually but not always involves very little in closing costs and no credit check.
You can also negotiate with the seller for low or no interest and also arrange to have no payments for a specified amount of time.
With this type of financing, you can create a win/win situation for both you and the seller.
The seller is able to earn interest on the note created and sell their property, and you can get into a great deal with terms that you can live with.
Many people can also get financing via the traditional investor mortgage.
With today's current economic climate however, there is usually a higher down payment (10- 20%+) and higher personal credit score required than in years past.
Also, there is often a limit on the number of mortgages you can have in your name.
Another idea is to take over the property subject to the existing financing.
Basically, the loan is left in place, and you start making the payments.
There is a risk however that a loan may be called due if this is discovered by the mortgage company.
Not real common, but could happen.
Best way to alleviate this is to set up escrow through a title company that disburses the checks.
I am nowhere near an authority on this subject, but there are many real estate gurus that teach this type of technique.
It is very effective for saving someone's credit who is facing foreclosure and wanting to move.
You can make up the back payments, and have a good property to either rent or sell.
Hard money or private money loans are another good source of funds if the deal is good enough.
A hard money lender will often lend 60 - 70% of the after repaired value.
Often you may have to pay 2-5 points up front, and up to high double digit interest rates(14-18%).
But if the money is only needed for a short time, and the total of the sales price minus the cost of repairs, cost of money, and cost of property still leaves you with a good profit, then this is a good option to explore.
ALWAYS make sure that you allow an overage for the repairs.
If you anticipate repairs of 15K, then it might be a good idea to run your numbers on $20k of repairs.
If a hard money lender turns down a deal, you had better analyze that deal again.
Hard money lenders are protected by the loan to value of the property.
If they don't want to fund your deal.
there is probably something that you are overlooking.
There are a wealth of hard money lenders out there.
As you build relationships and prove yourself with these lenders, you can often get better terms.
You could also joint venture with a private money lender.
These are individuals who will fund the entire project for a piece of the deal.
Often, that piece of the deal is very high.
It can be a great way to get started real estate investing though.
It also takes the pressure off if you are just starting out, because you will not have to worry about making mortgage payments while the property is being fixed and awaiting either a buyer or renter.
By starting a real estate investing company, you could then build business credit to help finance your deals.
The unsecured business credit will not show on your personal credit, and thus not handicap your ability to fund your deals via the above mentioned ways of financing.
By building business lines of credit, you will be able to build more credit ($300K -$500K), in a much shorter time than you could using your personal credit.
Oftentimes, this credit is at lower rates than you could get personally.
By raising this kind of credit available, you have more options when you are trying to acquire properties.
