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How to Finance Investment Real Estate

Author: Matt Davis
by Matt Davis
Posted: Jun 16, 2019
real estate

All money is not created equal, despite what we all may want to think about the situation. At certain times while you are learning how to invest real estate, you will notice that you need several different types of money in order to complete the transaction, at least you will need several different financing options to make it happen. Let’s take a moment to learn more about the various financing options available to beginning investors as well as seasoned investors.

1. Savings

If you are one of the lucky people out there or prudent would be a better word, and have managed to amass a significant amount of savings, then you are able to fund your own real estate adventures. Most of the time, this isn’t suggested as your number one option, but some people don’t like to be in debt to anyone. And if you have the money to make it happen, then by all means this is a manageable option for you to consider.

2. Traditional Bank Financing

Traditional bank financing is typical of anyone that wants to learn or knows how to invest in real estate, but it is one that we must discuss. You typically need a good credit rating, some assets, money down, and you are ready to go. In today’s market and economy, you will need to have about 10 to 20% down payment ready in order to invest, but I am sure you already knew that. Traditional financing won’t work for all deals that you may want to do, so this is something to keep in mind.

If you are learning how to buy foreclosure, for example, traditional bank financing isn’t an option for you because most banks will not lend on property that needs work. Therefore, you must have other funding sources at your disposal. And they are out there, you just have to be willing to look for them.

3. Hard Money Loans

Hard money loans or sometimes referred to as rehab loans are the ones that you will have to turn to if the bank refuses your loan application based on the condition of the property. Or you may not have a strong enough credit score to get a traditional loan, so you can apply for personal loans at for help and they are usually there with open arms. The thing about hard money lenders is that they typically lend short term money, 6 months to 18 months in time and there is a high interest rate attached as well, with points paid upfront. The interest rates on hard money lenders tend to run in the 12% to 18% range and can get more expensive than this.

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4. Private Money

Another solution that you may want to look into if you are buying in the foreclosure market or any market for that matter is private money lenders. These are private citizens or groups that form in order to lend money like a bank, but they are not a bank. Because it is their own private money, they can loan it to whomever they desire at whatever conditions both parties agree to. Usually, you still need to have a good credit score and at the very least a solid business plan. If you have experience and can show the quality of your work with a track record of returning the funds to the private lender, then your chances are greatly increased to be successful at getting them to put up the money on your behalf.

5. International Funding

Finally, international funding is an option for you as well. There are multiple sources overseas and outside of the country that are looking for ways to get into this market and these individuals are just what you might need to get to the next step in your real estate investing future. For most investing for beginners, this might not be the place for you to start looking for funds as it is a bit more complicated. Check out our article on international funding to learn more about this option.

There is a quick overview on five very different funding options for you to explore. I am sure with a little help from your real estate investing team, some self study, a good credit score, and a plan, you will be wildly successful in your venture and learning how to finance investment real estate.

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Author: Matt Davis

Matt Davis

Member since: Jun 13, 2019
Published articles: 1

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