We know that there are multiple different ways to get real estate financing. The problem is that most real estate investors have no clue these options exist. They are tricked into thinking they need their own CASH or Bank Financing to fund their deals. They are lead to believe that they must WHOLESALE properties for quick cash and create a “buffer” of assets prior to doing BIG DEALS. But that just isn't true.
There are many options you can use for funding real estate deals such as…
- Line of credit
- Partner up with someone
- Transactional funding
- Private money
- Hard money
- Bank financing
Let's take a look at a few of these options closer and see which ones might work for you…
Conventional bank mortgage loans will get declined once the lender finds out that it's either an investment property or that the property will need repairs. Banks also have only a maximum number of loans that they will give out and they will only lend on the purchase price.
- Inexpensive – typical interest rates between 5-6%
- Lengthy closing process
- Conventional bank loans get declined once the lender finds out it's either an investment property or that the property needs repairs
- Banks require a 680 credit score for investment properties
- Banks have a maximum number of loans they will give out
- Banks only lend on the purchase price and want 20-30% down
- Banks force investors to pay for repairs all by yourself out of your own pocket
- Banks force us to max out our credit cards and personal loan amounts to pay for rehabs
So as you can see, in the case of a big profit fix and flip, traditional bank lending probably isn't your best bet for funding. Let's look at another option…
Private lenders are everywhere and they are dying to find good investments with a high rate of return. They want to preserve their principal amount. To put that into perspective, corporate bonds are paying a 3.11% yield and CD's are paying about a 1% yield. Some stocks are paying a 3% dividend, which you could consider a yield.
- Private lenders are dying to find good investments with a “high yield”
- Corporate bonds are paying 3.25% yield
- CD's are paying a 1% yield
- Stocks pay a 3% dividend
- Real estate pays 12-15% yield in the form of interest on notes and mortgages
- They are HIDING FROM YOU: Chances are, if you talk to 100, you'll get one
- Some private lenders ONLY want to lend to someone with experience (ALTHOUGH, I had no experience when I received my first private lender investment back in 2004)
- Some private lenders only want to fund a percent of the deal, not the whole thing
Working with private lenders can be the absolute best way to fund your real estate deals, but you have to know people with money who are willing to invest in you. You have to have a few good deals under your belt to be able to show them the good work you do. If you're just starting out, this way isn't always an option.
Asset Based Lender Funding (Hard Money)
What if there was a funding option where you only had to worry about the cost of the appraisal and site inspection – and everything else was covered? That's what Hard Money Lenders or Asset Based Lending can do for your real estate investing funding. For example I work with a Flexible, Asset Based lender and they look more at your potential deal than your credit score or pay stubs. Here is an example of real estate investing deal that they funded.
Address: 3128 Dogwood Drive, Atlanta, GA 30354
Gross Profit: $42,870
Borrower: Desmond S.
Whether you are just starting out in your real estate investing career or if you have experience but just need access to funding, hard money or assest based lending can help. There is truly no time like the current to get into this industry and start seeing the profits roll in month after month.