Investing in real estate is one sure-fire way of becoming financially independent. Many people would like to become a real estate investor, but their fears prevent them from pursuing their dream of owning property. Some believe they need to have thousands of dollars in their checking account to buy residential or commercial property, but fortunately, you don’t need to use your personal funds to buy real estate.
Leveraging is the key to having success with real estate investing. Leveraging allows you to use someone else’s funds to fund your deal. There’s no limit to your investing activity when you have multiple sources of capital at your disposal. There are a variety of sources for investment capital you can tap into when you find a deal that meets your criteria.
Private lenders can be anyone who is willing to lend you money for your real estate deals. This could be a friend, family member, or anyone who is looking for a good return on their loan. The interest rate for a private loan can be anywhere from 12% to 18%.
Private lenders do not care about your gross income or credit score because they are looking directly at the deal. If it makes sense, they will be more than happy to provide you with a loan to fund the purchase of your property.
You can get a traditional loan from a bank or credit union. Traditional loans do not come easy. Be prepared to fill out extensive paperwork, and play the waiting game with the bank or credit institution. If you are approved, the interest rates on these loans are usually on the lower end between 5 and 9%.
Angel investors are usually well-off individuals who are looking to provide funding for new ventures. Typically an angel investor is looking to exchange convertible debt or ownership equity in the deal. Angel investors are typically known as individuals who are willing to take more of a risk. Their deals are not technically loans and they are looking for some form of business acquisition.
Hard Money Lenders
Hard money lenders can fund your deal within several days. In some cases, you may be able to get funded within four days so these deals are the best if you are looking to fund a deal quickly. The downside of a hard money loan is its increasingly high-interest rates. Borrowers can expect to pay close to 15% interest once they’ve been approved.
Commercial loans allow investors the opportunity to purchase commercial properties. Unlike a traditional loan, commercial loans carry a longer duration and offer lower interest rates. But their duration and lower interest rates make them harder to qualify for.
Depending on the area you plan to invest, there is a loan out there that will suit your needs. Before signing for a loan, it is important to make sure that you understand the terms of the loan. Real estate financing can help turn your investing dreams into a reality.