When it comes to the world of real estate investing, many investors can feel overwhelmed by the many aspects involved in acquiring real estate funding. But whether you’re new to real estate investing and looking to get your feet wet or you’re a seasoned pro with a sturdy head on your shoulders, finding money will always be one of your primary jobs as a real estate investor. In todays market finding the money necessary to start and complete a new investment is more accessible than ever before. Real estate funding doesn’t have to be complicated, and right now, we’re going to show you some of your different options, so you know what’s best for your financial situation, as well as some of the pros and cons of each.
Using Your Own Cash Completely
You know the old saying about cash. In real estate, some investors choose to use their own cash to fund their projects available to themselves, which is a nice luxury if you have it. While this avenue of investing does have it’s following, it’s not always recommended for most investors and can actually have drawbacks that many are unaware of. For example, unlike some of our other forms of investing here in this article, cash can only go so far, and if there are any challenges along the way, an investor might find themselves overexposed and unable to complete their project.
Arranging a Traditional Mortgage
Traditional type mortgages are one way that new investors use to enter real estate; typically this type of financing is used to acquire rental properties to begin building their portfolio and adding cash flow. This type of financing will typically have the lowest interest rate from other types of lending. However, the downside is that the bigger banks take a long time to get these loans approved and funded and also have many other regulations in place that make investors have to resort to other financing options.
Considering a Home Equity Loan
While a home equity loan may offer benefits regarding taxes, this type of real estate funding is only used by a subset of investors. By using your existing primary property as a form of equity, you’re able to tap into funding that offers some flexibility, but also some risk. For example, since the loan is partially off your existing asset, the loan institution often is less concerned with the specifics involved with the new property. However, again, there is risk involved since the existing residence is being put up as collateral to back the loan.
Business Credit and Hard Money Lenders
Finally, we come to what is probably the most common form of real estate funding, hard money lenders and business lines of credit. There’s good reason for this. Because a hard money loan for a real estate investment is based, not directly on your finances, but on the project’s ability to perform, the loan is more grounded in the specifics of the development. This can include the business-operation-side’s costs, as well as the construction costs that are often necessary for an investor looking for more. As oppose to traditional lending, hard money lenders understand urgency and can approve and fund a project relatively quickly, typically anywhere from 7 to 21 days.
In addition, business lines of credit can offer funding to cover additional cost associated with a particular project that was not covered by the hard money lender. Business lines of credit can provide money to grow your real estate business and cover expenses to bring on team members, marketing, administration, and so forth. Probably the best part about this form of funding is that applying for your business line of credit is easy and straightforward. If you are interested to see if you can qualify for business credit you can CLICK HERE to check what you qualify for. This is especially beneficial if you are new to the business and may need some extra money available to put down as a deposit for a project.