subject: How To Finance Real Estate Investing Deals [print this page] 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.
in this article, we explore the options available for financing your real estate investing deals.
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.
Wholesale deals is a good example of deals you can do with little or no money. 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 locate a house for a low price and put it house contract. 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.
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:
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 the house, then selling it at the same closing table. You walk home with the difference between your selling price and the buying price, less any closing costs.
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.
Hard money can be available within a few hours or days which makes it attractive for real estate investors.
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. You may need to make monthly payments and interest rates can 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 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. These come with low interest rates with terms about 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.
by: Simon Machcria
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