How To Finance Real Estate Investing Deals
To succeed in real estate investing, you must have a way of financing your deals. When you know which financing options you have available, you are able to structure your deals accordingly.
in this article, we explore the options available for financing your real estate investing deals. In order to be successful in real estate investing, you must be able to finance your deals. Knowing the financing options available to you helps you to structure your deals accordingly.
This article explores the financing options you have in real estate investing.
1) Buying with little or no money
You can do an unlimited number of deals if you do not have to put a lot of money down.
An example of such deals is wholesale deals. Wholesaling houses involves buying low, then flipping them at a wholesale price for some profit. There are two ways you can do this.
Contract Assignment:
You put a house under contract at a low price. You fax it to your title company to do title work. You then turn around and assign this contract to another real estate investor who closes the deal.
When the deal closes, you walk home with an assignment fee. The terms of the deal including your assignment fee are disclosed the assignment contract.
Simultaneous closing:
In this case you act as a buyer in one contract, and a seller to your buyer in the second contract.
At closing, you buy the house and sell it at the same closing table. The difference between your buying price and selling price less any closing costs is what you walk home with.
2) Hard money
These are usually rehab loans with a low time frame such as 6 to 12 months. They carry a high interest rate, and are based on equity on the property, not personal credit.
It can be available fast, sometimes with a few hours or days.
3) Creative financing
Techniques like lease options, owner financing, etc, that do not involve buying the property for cash involve creative financing. It might be necessary to put some money down, but finance part of the deal through creative financing.
This can be a big money maker and can allow you to do numerous deals without being limited by money.
This technique will not work when the property needs repairs, or when the owner wants all cash for their property.
4) Revolving credit
This can be a line of business credit, credit cards, etc. They require monthly payments which can get high, and the interest rates can also be high.
You can have limited amount of credit and the number of loans you can get.
5) Private lenders
These are people with cash they can invest. Their money is secured by real estate to earn more than they can get with bank investments.
Private money is the most preferred type of financing for real estate investing deals.
6) Mortgage loans
Bank mortgage loans can also be used to finance real estate deals. The interest rates are generally low and the terms of the mortgage can be between 15 to 30 years.
You may have to put 10 to 20% down. You must have good credit and you are limited to the number of loans you can take.
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