Investing In Real Estate - Finding Funding

No money down real estate investing is possible, but it is
not what most new real estate investors think it is. Money
is always required to do a deal, no money down means that
you don't put any of your own out of pocket funds into the
investment. So what do you do when you need funds to
purchase properties, but don't have any available on hand?
Here are several ways an investor can come up with financing
for projects.

Conventional bank mortgage. While this seems obvious, some
investors forget that banks do lend money for investing. If
you have good credit, this might be your best option. You
will get a favorable interest rate with good credit, the
higher your credit score, the lower your interest rate. If
you are planning on flipping a single family home, you can
apply for a residential mortgage, which will automatically
have lower interest rates than other types of loans. Some
banks will not lend more than the actual value of the home,
so if it needs significant repairs, speak with them about a
piggyback loan for the rest of the money. Make sure to shop
around, as rates, fees and terms will vary depending on the
lender. The best way to do this is with a mortgage broker,
who will find the best rates for you.

Private investor. Private investors are people who have the
liquid cash, but don't have the desire to actually do the
work themselves. They are willing to put up the money and
take a certain percentage of the deal. So if you find a
property that you want to invest in, the private investor
would give you the funds needed to complete the deal, or
they would undertake the financing. The terms you would
have with the private investor would depend on your mutual
agreement. Just as you would with a bank application, make
sure you have sound fundamentals on the property and an
expense worksheet showing where the money will be spent and
how much expected profit there would be on the deal. The
better the numbers, the more likely you will find a private
investor.

Hard money. Hard money lenders specialize in real estate
investing. They will lend you normally up to 70% of the
After Repair Value (ARV) on your property. Hard money is
only for short term financing. The interest rates are very
high - sometimes 14% or more, but unlike with bank
financing, they will get your funds to you fast (normally in
installments as work is completed). Hard money is good for
those who need to get funds fast to do a deal.

Seller financing. If the seller is not in need of immediate
cash, they may consider financing you. You could write up a
mortgage contract, agreeing to pay the seller a set
percentage rate and set monthly payments. Once you sell the
property, you can then pay off the mortgage note to the
seller.

No matter which way you look at to finance your real estate
investments, make sure your cash flow numbers work. If you
have good cash flow numbers on your deal, the financing will
be easy to find!

Michael Russell Your Independent guide to Investing

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