Real Estate Investing 101: A Beginner’s Guide to Real Estate Funding
Have you decided to start investing in real estate, but you don’t know where to get the money you need? Are you worried that you won’t find the right funding option for your investments?
About 90 percent of the world’s millionaires have created some of their wealth by investing in real estate. That’s an impressive track record.
When you invest in real estate, you need a reliable source of money. Here are some real estate funding options to get you started.
Why Invest In Real Estate?
Investors that own investment property will earn rental income paid by their tenants, and they may earn profits from business activities. The property may increase in value over time as well.
These investment options are a stable source of cash flow and provide passive income. Investing in real estate is one way to diversify your investments using leverage or financing.
What Is Real Estate Financing?
Real estate financing is the funds an investor needs to borrow to purchase a rental property or property for their business. If you already have access to a large amount of capital, you can use your personal cash. Most investors need an outside source of funding.
Investing in real estate takes more capital than investing in the stock market. This type of financing contract usually has different terms than traditional financing.
Real Estate Funding Options
Most lenders will want to place a lien or hold on the investment property or have you sign a personal guarantee for the money they invest. You can find more information at Kiavi.
Here are some of the options available to most real estate investors.
Seller Financing
In some cases, the seller may be willing to finance your purchase of the real estate investment. Seller financing can be similar to a private lender, and the seller may want a personal guarantee.
Hard Money Loan
This funding option is suitable for investors who need a short-term loan and don’t have a stellar credit history.
Private Money
If you know someone willing to lend you money privately, you can make a private contract to borrow at a specific interest rate and payback terms. The private money lender may want a personal guarantee.
Personal IRS Account
If you have a self-directed IRA, you can choose to access it as a funding source. The investment will need approval by the IRA custodian.
Peer To Peer Funding P2P
Another option that is becoming more popular is borrowing money directly from another person.
Peer-to-peer financing sites make this option more viable than in the past. These loans may offer very competitive interest rates and tend to be more flexible than a traditional commercial loan.
Find The Funding You Need
Now that you know a few of the options for real estate funding, you can begin to explore the opportunities available in the market. Your investment property business can reach its full potential when you put in the work.
Did you find this article helpful? If so, be sure to use the simple search feature to find more real estate investing ideas.
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