Finding Money to Invest in Real Estate
Ok, so you want to invest in real estate, but you’re not as rich as Bill Gates, or Warren Buffet? Don’t despair. Finding money to invest in real estate is the key. There are many places to find money to invest in real estate.
Best place to start is with you. All you need is good credit, a good job that you have been on for 2+ years, no bankruptcies, foreclosures, repossessions in the last 3 years, and a good debt to income ratio.
If you can’t currently meet this criteria, it should be your first priority to improve things, so you can soon qualify to get a loan.
Plus, a healthy amount of ready cash to use as a down payment, closing costs, and make ready funds. And, the home you want to buy should be in reasonably good condition for a lender to give you a loan on it.
If it needs work, which most investment properties do, it makes it that much more difficult to get a loan.
If you can meet all of this criteria, great, you are on your way to making a property buy, and you can hopefully parlay it into more, and more buys, if that is your desire.
If you can’t meet this criteria, don’t feel bad, you are not alone. Many people can’t live up to these requirements, but still need a place to live, and perhaps would like to buy more real estate to use as an investment, or as a nest egg for the future.
We all know too, it is better to be an owner than a loaner, or renter, from a financial point of view.
Here are the 3 best ways of finding money to invest in real estate to help make your real estate investing dreams come true.
Find a Partner
Often times, a partner can bring to the table, what you are lacking. They may have good credit, a line of credit with a bank, or another lending institution. Or they may even have cash, which everyone prefers.
You may have to provide a great deal on a property that you came across. You may need to bring some sweat equity to the deal in the form of doing needed repairs, or providing materials to facilitate needed repairs.
You may have to coordinate everything involved in the repair, and selling of the property. You may even have to give up a larger percentage of the profits to sweeten the deal enough for a partner to want to come on board with you.
But, isn’t it better to make something than nothing? Worst case scenario, is you are gaining experience in the real estate investing arena, and you will be that much more qualified, and more likely to be successful with your next deal.
I know general contractors that are great at doing the repairs and upgrades needed for investment properties. They align themselves with credit, or cash partners, and in exchange for doing all the improvements on the property, they receive a percentage of the profits when the home is sold.
I also know investors who partner with other investors to enable them to afford to buy and fix up nicer properties that they wouldn’t be able to afford otherwise, and as a result, realize a larger profit when the home is sold.
Private Lenders (Investors)
Finding money to invest in real estate can be accomplished with a private lender. A private lender is anyone who is not a professional in the lending business.
They are normally wealthy individuals that have cash, retirement plans, home equity, lines of credit, or other liquid assets.
A private investor can realize a higher rate of return from doing a deal with a real estate investor, in most cases, than they can get from a bank.
Normally, the private lender will expect between an 8% – 16% return on their investment, or possibly a bit lower with some negotiation. This private investor loan will be guaranteed, or secured by placing a lien on the home.
If you are known as reputable, honest, and competent, and agree to pay a nice return on investment, you should have little trouble finding a private investor to help fund your deals.
Hard Money Lenders
One of the best ways of finding money to invest in real estate is with hard money lenders. Hard money lenders are companies whose primary focus is on providing loans for rehab, or residential flip deals.
Hard money lenders are considered by most rehabbers or flippers, to be the best lenders for their projects.
They provide high interest rate, short term loans, which usually include needed repair costs along with the loan. 10%-18% is the normal interest rate charged by hard money lenders.
Because the rehabber does not have to come up with any money, and the loan includes extra for repair costs, it is a very good deal for him.
Perhaps the best thing about hard money lenders, is that they care not about your credit or how much cash you have in the bank. They only care about the deal that you bring to the table.
They will only lend however, on deals that make financial sense to them. Of course, they use the home itself as security on the loan.
They will do the deal if they know there is enough profit in the deal, in the case that you default on the loan. That way, if need be, they can take back the home, and resell it for a nice profit if you fail to pay back the loan. This provides them additional incentive to make the loan.
People with money, rather it be private individuals, partners, or hard money lenders, will always be open to making good profits. Your job is to find the deals. Finding money to invest in real estate will be easier than you may think, if you find the great deals first, and know where to look.