When we talk about investing in the real estate market, we automatically think of big amounts of money that are hard to get for most people. What if we tell you that these kinds of investments are possible even if you don’t have all the money that is required for it? The answer is easy: YES, it’s possible to do it! In this article, we will show you the best options to make it happen.
Private Money Lenders and Hard Money Lenders
Private Money Lenders are individuals or a pool of individuals that loan their own money without middlemen, usually for real estate investments. These transactions are fast and efficient and can cost between six and 12 percent of interest on the money borrowed.
In a similar path, Hard Money Lenders might be a fund of investors that typically offer short-term loans secured by real estate investments. The terms are usually between 12 months and five years and they might charge up to 18 percent of interests.
The mentioned ones are the most popular choices when financing real estate deals because these loans are not given by banks. Additionally, these loans have their own guidelines, which include higher fees and higher interest rates.
This option doesn’t require large amounts of money nor a high credit score. It consists of finding a home for an interested buyer at a higher price than the value agreed with the seller, and keep the difference as a profit.
Partnerships are a very common option for real estate investments. It’s about finding different people interested in the investment. Each one of them contributes in a different way or with different amounts of money. Keep in mind that aspects such as goals, risks, roles, and returns should be discussed and clarify before creating a partnership.
This alternative consists of rewrite the first mortgage and do a cash-out refinance or keep the first loan and add a home equity line of credit. It is a viable option considering how property values are going up in recent months.
Option to buy
This method allows an investor to obtain a property without initially taking its legal ownership. In this case, the investor signs a legal “option to buy” from the owner at a specific price for the future. That agreement ensures the purchasing of the property at a later date and for the specified price. In the meantime, the investor rents the property on a long-term basis.
An option to traditional loans where an investor buys a property directly from the owner/seller without a bank’s mediation. Both sides sign a written contract where they agree to the terms: interest rate, payment schedule, and consequences of default.
In this strategy, an investor earns income by renting their primary residence. For those in single-family homes, they can rent a spare bedroom. For those with more than one property, renting at least one of them is the best option. This allows investors to have a cash flow.
These are the most well-known sources of funding for a real estate investment and usually, they imply good deals. It’s worth mentioning that these loans can take a long time to receive approval, which makes them less attractive than other options.
These loans are offered by individuals (a single lender or many people), each of whom is expected to contribute to a portion of the total amount of money that is required for the investment.
As you can see, there are plenty of options when it comes to finding financing for a real estate investment. It is possible to do it if you don’t have the needed amount to start and even if you don’t have a good credit score, many choices don’t require it. Investing in real estate with no money is possible. You just have to know which is the best finance opportunity for you.