How To Finance Real Estate Investing Deals

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.

A Plan for Investing in Real Estate

With the way the housing market is, you can find some really great deals if you are looking to invest in some real estate. If you have been looking for the perfect business venture and not sure of what will give you the most return on your money, you may want to take a look at some properties and come up with a plan on how you can make a nice profit by starting a new business venture.

If you are not too familiar with the real estate industry, you may want to think about getting a bit more education about it. There is a lot for you to learn and you won't be able to learn it overnight. In addition to learning on your own, you should look into getting a mentor. Make sure that whoever you choose to learn from has more than a fly by night education in the industry. People that make good mentors and business partners are real estate agents. You should also have a good attorney that specializes in property law.

When you are investing in property, there is more than just giving an agent some money once you decide to purchase a property. You need to thoroughly research any property you are interested in. You need to know whether or not there are any liens on it, if the foundation is up to code and whether or not there needs to be any work done on the property.

If you happen to find a piece of property that you feel would make a great investment and it needs a little work, you should find out how much it would cost you out of your pocket to bring that property back up to par. If you find that you need to make a small investment outside of the purchase, you should go over any and all details with a real estate attorney and broker. The attorney will make sure that all the details of the contracts work best for you and to keep you from being taking advantage of or entering into an unfavorable agreement. The broker will streamline the buying process and help to get you the best deal. Once you have taken care of all the contractual and financial obligations, you are well on your way to being a successful entrepreneur.

If you are planning on renting the property out after you have brought it up to code, you may want to make a few modifications that will make the home more appealing and allow you to charge more for rent. You could add a dishwasher, pool or anything that you think will make the home more marketable. Make sure you cover everything with your business partner first.

Don't charge an astronomical amount of money for rent. Consult with an attorney to come up with a good rental agreement that outlines your responsibilities as landlord and your tenant's obligations. This will help protect you and your rights as the real estate owner.