Real estate is one of the safest investment routes out there. The biggest issue, however, at least for starters is the inability to find funding source to invest even when there are dozens of attractive deals waiting for them. Low credit score, high restrictions and careful lending practices have made obtaining mortgage a herculean task. This and other reasons have made many investors unable to build or expand their real estate portfolio. However, there is a need to understand the various financial options available, even if you are just starting out in the industry or an experienced investor. Laws change, circumstances vary and hence it is necessary to keep yourself updated on the latest rules and trends in the real estate world.
Financing a real estate property is what makes the industry work and survive. Apart from getting a good education in this topic, and maybe a certification or degree in the field, capital is necessary in order to invest if you are a real estate agent, developer or flipper. If you have a good chunk of money in your own savings account, there is no better way to fund your venture than this source. It will help you get your investment business off the ground instantly. However, in the absence of savings, you will have to rely on other investors, lenders and creditors. The good news is, such funding sources are available easily and you can borrow millions of dollars even without good financial standings or credit rating.
Experienced real estate developers and flippers know the right technique to make use of available funds from other savvy investors. It is a matter of knowing where to find the money and how to convince the lenders to invest in your real estate business or investment portfolio. In other words, it doesn’t take money to obtain money. It is about a smart investor being able to use other people’s money and make money. If you want to be one of those smart people, then you need to familiarize with some of these funding sources. This way you will be able to make informed decision and have a successful financial portfolio.
Fund For Your Own Growth
The first step to making big in real estate is to invest in yourself. Get the kind of knowledge, education and degree that you may require to trade deals successfully in the future. By taking classes in real estate, attending seminars, getting in touch with real estate gurus, your growth capital will be put to good use. You will gain knowledge on market condition, how to raise fund which will let you buy your first investment property without a hiccup.
Funding Through Private Lenders
Private lenders are just about anyone who are interested in your investment strategy and want to lend a hand at the same time. In most of the cases, you will need to educate these investors about your plans and convince them how good the returns will be one, two or five years down the road. After all, who wouldn’t want to earn five or ten times more than what banks and financial institutions offer for their savings, right? Private lending is an easiest way to have access to money when you are into real estate business. These are individuals who want to invest in anything that is secured by a real asset. You are only giving them an opportunity to invest in one.
And these lenders can offer the fund faster than banks and credit unions. This means you have greater leverage when you are purchasing with private cash. While bank lending takes anywhere from forty to sixty days for a loan to close, private funds can be obtained within a week or so. Being able to have access to cash easily can let you expand the investment to other areas as well.
Now that you know your various funding options, it is time to look at what needs to be done when the real estate property has been purchased. If you are a redeveloper or flipper and want to make some profit out of your investment by reselling, the first task is to take a complete physical walk-through of the property. Look for things that you or the inspector may have missed during the initial or subsequent inspection. Determine what absolutely needs to be repaired and what are cosmetics that need attention later. Make sure that you have an idea of how much you can afford to spend on the repairs and what your profit margin will be.
You don’t have to be a construction expert to determine the kind of repairs the house needs unless those repairs are not visible to naked eyes. Termites and plumbing issues may not be obvious, for which you may need professional help. For most cosmetic repair cases, just a ballpark figure is enough to initiate the repair work. If in doubt, don’t hesitate to get free estimates from various contractors in your local area. Once the repair work is done and the house is prepped up, it is time to invite potential buyers.
Remember that mistakes happen all the time with real estate dealings. Even the most experienced investor is not immune from major blunders like selling the house for much lower than the market rate or not getting double opinion on the structural condition of the house. It is also important to understand the current market condition and the comparables. One of the biggest mistakes people commit is making unnecessary modifications to the property they have purchased or about to sell. Opening up space to create a view, creating more usable space, changing the layout to look different than the rest of the properties in the community or extending a portion of the house can all have a dramatic effect on your property’s resale price as well as value. It is therefore necessary to tread carefully, because for most people – buyers or sellers – real estate is their most expensive investment.