How To Finance Real Estate Investing Deals
Category : Hard Money Loans , Real Estate Loans
In order to be successful in real estate investing, you must be able to finance your deals. When you know which financing options you have available, you are able to structure your deals accordingly.
This article explores the financing options you have in real estate investing.
1) Buying with little or no money
Whenever you can buy houses with little or no money, you can have potential to do unlimited number of deals.
An example of such deals is wholesale deals. This involves buying a house for a low price, then you turn around and wholesale it for a higher price. There are two ways you can do this.
Contract Assignment:
You put a house under contract at a low price. You get this contract to your title company or attorney to do title work. You then turn around and assign this contract to another real estate investor who closes the deal.
You walk home with an assignment fee when the deal closes. The terms of the contract assignment are clearly defined and state how much your assignment fee is.
Simultaneous closing:
You put a house under contract to buy, then locate another real estate investor to flip it to and you sign a contract with you as the seller.
You end up buying and selling the house at the same closing table. Your profit is the difference between your buying price and selling price, less any closing costs.
2) Hard money
These rehab loans have a short 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
This includes techniques like lease options, owner financing, etc, that do not involve putting buying the property for cash. 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
Private lenders are individuals with cash they can invest. Their money is secured by real estate and are willing to invest it to get higher returns than they can get on bank investments like CDs.
Private money is the most preferred type of financing for real estate investing deals.
6) Mortgage loans
You can also finance real estate investing deals with traditional bank mortgage loans. These come with low interest rates with terms about 15 to 30 years.
However they can require that you put 10 to 20% down. They are based on your credit scores and you are limited to the amount and number of loans you can borrow.