The most successful real estate investors have one thing in common they’ve learned how to take advantage of other people’s money to find and close deals. The new real estate investors or those who are financially strapped can utilize this strategy to get their foot in the real estate door without having a financial resources or credit to do so.
Seasoned investors on the other hand have found that using other people’s money, liquidate their available funds and freeze up their cash to invest even more. If lack of funds is keeping you from achieving your real estate investing dreams, don’t let it. The fact of the matter is you don’t need any cash reserves of your own to acquire a deal. You just need to have the right people by your side. So without further ado, here are the seven different ways to invest in real estate using other people’s cash.
Hard Money Lenders
One of the most popular way to acquire cash real estate deal is through the help of hard money lenders. This type of loan is not given by banks but rather individuals and businesses who will finance investments for a return. Hard money lenders charge these in the form of points which represent an upfront percentage cost based on our own amount. Keep in mind these points are in addition to restraints that hard money lenders charge which typically range between ten to eighteen percent.
Private Money Lending
Similarly the hard money lenders and real estate investors can also take advantage of private money lending. A private money lender can be anyone from your parents to your friend to your mentor to your co worker. Essentially anyone willing to loan you money. The greatest benefit of using private money is that investors get to create their own terms for the loan. Interest rates on private money are typically higher than those on traditional loans. The qualification process is more lenient and the speed of the transaction is fast.
Wholesaling
Wholesaling is another great way to start investing in real estate as it requires either a high credit score or large sums of money down. Real estate wholesaling consists of finding a discounted property putting it under contract. A signing the contract to a potential buyer and charging that new buyers a fee usually around five to ten percent of the sale.
Forming A Partnership
Forming a partnership can also help individuals lacking capital investing real estate. Now what other investors lack, the other can make up for. Most real estate partnerships rely on one partner finding a distress property at a discounted price while the other one uses their credit score and working capital to finance it. Just be sure that every partner bring something unique and valuable to the table.
Veteran Investor
If you’re a veteran investor and already own a property using home equity is a way to invest more in real estate without having to use your link with capital. There are two ways to take advantage of this strategy. One is to re write your first mortgage using a cash out refinance. The other is to keep first loan in place at a home equity line of credit and use that money to buy a new investment property.
Lease Option
An option to buy also known as a lease option allows investors to acquire properties without initially taking legal ownership. The investor will sign a legal option to buy from the homeowner for specific price in future. And in return the investor rents the property out on a long term basis. Until here she purchases the property at a later date for the previously determined price.
Seller Financing
Last but certainly not least investors can take advantage of seller financing to acquire a deal using someone else’s money. Seller financing works like this. the investor purchases the property from the seller rather than the bank and the two sides signed an agreement that identifies an interest rate, repayment schedule and the consequences of default.
Who knew there were so many ways to invest in real estate using other people’s money. Just because you have a less than impressive credit score or lack of liquid capital, doesn’t mean that you can’t set yourself up for financial freedom using real estate. If you want to invest in real estate using little to none of your own capital you just need an extensive and trustworthy network. The trick is knowing who can help you and how to use them to your advantage.
