Never use your own funds, instead use loans for real estate investing, put OPM other people’s money to work for you.
When buying real estate set yourself up for success and use safe investing strategies that let you keep your money in your pocket,
or buried in the yard, or where ever you keep it.
Look at it like this – if you were to use only your money then you’re limiting yourself and your scope of investing by the amount of funds that you have available. But if you use other peoples money (OPM) your amount of available funds are unlimited.
Investors need funding in 3 different ways.
To acquire properties and build long term wealth.
To start or build their investment company.
And to generate passive income.
MAKING LOANS FOR REAL ESTATE
INVESTING WORK FOR YOU
Passive income and cash flow notes.
Most investors never think about borrowing money to lend it back out by becoming the money person and supply funding to other investors at a higher rate. Its a nice passive form of investing without the liabilities of ownership. At the next REI meeting, tell the real estate investors,
“I want to give you all the money you need for your deals.”
Financing for your investment business.
The day to day operations, laptops, training, overhead, advertising, and operational systems are just a few of the expenses that need to be paid long before a property is bought or sold. And if your focus is on paying the bills then your concentration won’t be on turning properties.
Before you find the property you’re going to purchase, its important to establish relationships and contacts with a variety of funding sources to have your loans for real estate investing set-up and waiting to go. Besides the property, your exit strategy is the next biggest factor in determining which type of funding you’ll need.
Can you Proof UP?
It just means can you show proof of funds or where your money is coming from? Be Ready for business. Dramatically increase your buying power when you get your money set up first. You’ll be prepared to negotiate like a pro and make offers that won’t be turned down.
Depending on which financing strategy you choose, some lenders won’t require any documentation from you, because its the property that will need to qualify. Or some lenders will require your personal info and credit score, appraisals and a complete executive summary or business plan. Prove that you are a professional investor always provide accurate information and full disclosure.
BEST LOANS FOR
REAL ESTATE INVESTING
Funding consists of cash, traditional, private money, hard money and creative finance strategies. And it isn’t just about loans,
it’s about structuring the loan through programs and conditions that
best fit your deal.
Fortunately, investors have a wide variety of choices.
First, avoid traditional or conventional funding from the Big Banks like the plague. They’ll make you jump through hoops, it takes forever to be approved, and even if you do finally get the loans for real estate investing, the most you can finance is 4 properties, then you’re cut off. Period. After that no one will touch you. And they usually want you to have a high credit score and sign personally on the loan.
Its a rough way to go.
UNCOMPLICATED LOANS FOR
REAL ESTATE INVESTING
Hard money funding is a fast loan for real estate investing.
Hard money lenders are easily available across the U.S. and
online applications for loans are convenient.
Its quick- 3-7 days to close.
Its equity based, the property must qualify-
NOT the investor or your company.
The loan to Value Ratio (LTV) must be between 60-65% depending on the condition of the property and the location. The nicer the property,
the more funding you will qualify for.
Private money can be instantly right there at your fingertips, 24/7.
Find individuals who have previously loaned money in the last 90 days. This info is available in public records and through automated investment systems. You can find out how much money was loaned and the types of properties and areas in which they invest all with a few clicks.
Transactional funds are overnight type of
loans for real estate investing although they’re also available in 30, 60, & 90 days. Also referred to as bridge financing. It’s quick and reliable with no down payment, little documentation and no credit check.
Because the most important factor to getting this loan approved is having a quality end buyer in place.
Cost is a straight fee and around 2-5 points and more for the longer terms. Best used for short term (24-48 hour) financing for
flipping properties and back to back closings.
Angel Investors pick up the slack with special types of loans for real estate investing.
And they’ll finance deals that no one else will touch but they require a sound business plan to support the loan, documentation, and a lengthy review period.
Its worth the trouble because once you’re accepted by the Angel investor, your next loans for real estate investing will get the
green go light quickly.
Work the retirement accounts.
Loans for real estate investing can be made with funds from a 401K
and an IRA, plus the funds can be from your accounts or
somebody else’s accounts.
Its a clever way to gain tax advantages while growing and using your money. No penalties, no tax, no banks, no loans, no credit what so ever. And it also acts like a bull dog by offering an extra layer of asset protection to your investments. The funds from the IRA can be invested in your business by issuing stocks or the funds can be used to purchase properties.
CREATIVE LOANS FOR REAL ESTATE INVESTING
Using other people’s money can be as simple as asking for owner financing. Always try to negotiate zero down and $0 interest.
This is an especially good loan when your exit strategy is to hold the property as a rental for long term.
These are lovingly referred to as subject to properties,
where you just step in and pay the monthly payments on an existing loan without ever accepting responsibility for or placing your name on the loan. This strategy is even better if the interest rate is reasonable because it gives you the opportunity to sell the property with owner financing in place.
PRO TIP: Structure the loan as monthly payments with a prescribed dollar amount instead of combining principle and interest to determine the monthly payment.
Crowdfunding is new, some say its a fad, regardless its viable for all types of businesses and projects and now its become popular for loans for real estate investing. Its all about the prep work and presentation of your company that gets investors excited about investing their money with you. Plus knowing the rules when putting the package together.
LLCs or LLPs are the most popular for the sponsor management of REITs due to legal and tax benefits. REITs are also governed over by the SEC with strict rules and regulations. Plus REITs take time to establish, however once established, they’re one of the most flexible funding sources because you direct the funds. Its usually experienced investors who form the REITs for long term investments.
Corporate, Multi- Partners, and Joint Ventures
are popular sources for loans for real estate investing because they reduce the amount of risk by distributing it through out the group and usually, no payments on the loan are due until the end of the project but most require an equity split on the property.
An equity split on the deal is not a funding strategy we like to use unless its with our own IRA instead its almost always better to pay a high interest rate.
However, we are willing to do what circumstances require and still do equity splits sometimes. Why?
Because half of the profit is better than no profit.
OPM, other people’s money,
Don’t enter into a real estate deal without it.
Educated investors (and you too) know how to leverage OPM other people’s money to access your own private Fort Knoxx.
With these different types of loans for real estate investing you’ll find gold for all your real estate financing needs.