Whether you are a new real estate investor looking for your first property or a veteran that buys 10 houses a month, in our current real estate market, even with the recent lifting of the 4 property limit for investors for highly qualified buyers, it is critically important to prepare your financing in advance.
Of course, you could use investment strategies like lease option, subject to or other types of owner financing to avoid this challenge altogether, but there are so many great deals right now being offered by banks or motivated sellers that having access to some cash or immediate financing can make a huge difference in the opportunities that are available to you.
So, what are some solutions to finding money and/or real estate investor financing for making these purchases?
Well, the big ones that immediately come to mind are: private money, partnering and hard money lenders (in that order).
Private money is when you approach people that are earning 3 to 5% on money they have invested in bank CDs and offer to pay them 6 to 10% (sometimes more) for lending money against a property you are buying. Instead of them lending the money to the bank and getting the lower bank deposit rates and then having the bank turn around and lend that to folks to buy homes, they become the bank lending directly to you to purchase property and they make the extra profit that the bank would otherwise make.
Partnering to buy more houses than you could by yourself can be a great strategy for the right partners. I think it is important that all your partners realize the pros and cons of investing in real estate before entering into a partnership and having a well drafted partnership agreement by an attorney that is neutral to both of you might is well worth the money. The great thing about partners is there are a lot folks that are interested in investing to real estate and have resources (cash and/or credit) to buy, but don’t have the time or expertise to find truly great deals and then manage them effectively during the sales or rental process.
While hard money lenders are becoming stricter in their lending requirements and a large portion of them have left the business during the latest market correction, there are still hard money lenders that, with the right deal, are ready to lend money to make a purchase. Networking at your local real estate investor club meetings and your local newspaper are the best resources for finding hard money lenders. Rates and terms vary widely, so shop around.
Until my next post,
James
P.S. Take your real estate investing business to the next level by upgrading to our Real Estate Investor Bronze Membership now.
While you should always be on the lookout for owner financing opportunities, it’s nice to have your own financing already in place to give you the flexibility to make all cash offers.
A great source of non-traditional financing is private investor loans. It’s a good idea to collect a list of private lenders that you can call when you have a new deal lined up. But where do you find them?
We find private investor loans in some of the most unlikely places.
Most of these lenders aren’t really lenders at all. In fact, many don’t even know they are in the market to lend money. You find these loans by talking to lots of people about what you are doing.
That’s right. You find these loans by talking. A lot. As you explain to your Uncle Tommy the type of investing that you do, and you ask him if he knows anyone who might be interested in putting his money into real estate, you may be surprised to hear him answer, “As a matter of fact I do know someone who’s interested – me.”
Many folks have chunks of money they are shuffling around between investments like certificates of deposit, money market accounts, etc. They are always looking for a better place to park their funds.
Many people have also heard that real estate is a great investment, but lack the knowledge and/or time to get involved. These are your perfect candidates for private money loans.
Busy professionals may have extra money to invest, and probably are interested in diversifying their portfolio into real estate, but simply lack the time to find, structure and manage their own deals.
You provide them a way to invest in real estate without having to invest their time. The great thing about finding these types of lenders is that you don’t have to “sell” anyone on the idea. Simply share what you are doing and ask them if they know anyone who might be interested.
The best way to find these lenders is to network. Meet lots of people and tell them what you do. Make sure your friends and family know what you do and know that you are always looking for interested private investors. You might be surprised at how many people raise their hand.
Until my next post,
James
P.S. Our Real Estate Investor Bronze Members who get access to our Real Estate Investor Wiki can access my own plan for raising private money including access to my special reports, private money presentation, information on how to hire a private money coordinator whose sole job–paid only on commission when they raise money you actually use–is to raise private money for your deals plus much more. Sign up for Bronze Membership today and access these additional, extremely valuable tools for raising money for your deals.
