Financing Real Estate Deals – How To Make It Work
Category : Hard Money Loans , Real Estate Loans
Here are 6 ways to fund your deals:
Bank Financing: This is the first and most commonly referred to technique for novice and seasoned investors. Bank Financing often offers the cheapest and longest term financing available. Mortgage brokers are mostly used for this king of financing. The problem is that motivated sellers usually need cash right away, and this kind of financing can take 30 days or more to fund.
Refinancing: This is simply obtaining a new loan to pay off a loan that already exists on a property. Title does not change hands. Only the security deed changes. Reasons for the refinance are better terms, or there is large enough equity to do a cash out.
Hard Money Loan: A hard money lender is a quicker faster way to get cash. The loan is based on the value of the property itself, and typically not on the credit of the borrower. Many hard money lenders were at one time or are real estate investors. Closing can happen in two weeks or less, but the fees and interest rates are much higher than a regular bank loan. Hard money loans are typically used as a short term method of finance, and are sometimes referred to as bridge loans.
Equity line: This is a loan on the equity of a property. The benefit is the funds can be accessed when needed, repaid, then used again as needed. So you only pay interest when the funds are being used. Once established, equity lines can be a quick and relatively inexpensive method for financing a deal.
Private lenders: These are people that typically don’t make loans at all. They have money sitting in savings or other low interest bearing accounts. They usually consider investing in your projects because the loan is secured by real estate, and you will offer them a better return on their money than they can realize with savings. These potential lender can be your friends, doctors, attorneys, anyone with money to invest. This can be a very attractive method for lending because you can negotiate the terms, and there is no qualifying process.
Unsecured lines: These are the credit cards in your wallet. For portions of funding or repairs, these lines can be great sources of short term financing. Call you credit card company for increases in the lines available and negotiate better terms. You can also ask for promotional rates. Make sure you use this for making money, not buying toys.
This is just the tip of the iceberg. There are many ways to creatively finance your deals. Keep reading and learning about different ways to make it happen. Also-don’t forget that mixing up the strategies is a strategy in itself. Sometimes it may take a traditional loan, plus hard money and use of your equity line to make the deal happen. Just make sure the number work!