6 Туреs оf Fundіng Тhаt Rеаl Еstаtе Іnvеstоrs Usе tо Вuу Рrореrtіеs

Сrеdіt Саrds

  • Ability to purchase more at once
  • Instantaneous funding
  • Your debt is unsecured: there is no lien against your property​​​​​​​
  • High rewards points on most credit cards
  • High interest rates
  • Low loan/credit limits
  • No long term guarantees, the credit card company can cancel on you at any time forcing you to pay off the balance

Hard Money Loans

  • Speed. Quicker process than traditional loans because the lenders are not as worried about specific criteria.
  • The value of the collateral, the property, is more important than your financial position.
  • Flexibility. Hard money lenders don’t use a standardized underwriting process. Because of this you are able to evaluate each deal individually, like repayment schedules. ​​​​​​​
  • Cost. Hard money loans have much higher interest rates.
  • You typically need more assets to qualify because the loans aren’t based on how well you can pay it off.
  • Most hard money loans are short-term, meaning you need to ensure you will have the capital coming in to pay it off.
  • You must show the income potential of the property so investors can see the deal makes sense.

Private Money

  • These loans are more relationship based. This allows you to sell yourself and why the deal is going to work without worrying about traditional loan criteria.
  • You and the lender can come to your own terms. There are no set lending requirements.
  • Similar to hard money loans, finding funding and getting it secured is a quick process compared to traditional lending.
  • The qualification process to get the loan is usually less complex and time-consuming. There isn’t a “set” criteria you must have.
  • You typically avoid massive fees and closing and closing costs with a private money loan.​​​​​​​
  • It can sometimes take longer to find these people (hence why networking yourself is crucial)

Frіеnds аnd Fаmіlу Меmbеrs

  • You know where to find these people. Literally though, it is much easier to get in front of these people.
  • Friends and family are more inclined to say yes because they know you best.
  • These lenders are less likely to be as knowledgeable as far as what is a good deal and what is a bad deal, putting you both at risk of a deal going bad. Especially if you’re new to investing.

Conventional Loans

  • Lowest cost of all the loans.
  • No dollar limits are placed on conventional loans.
  • Lenders usually don’t require mortgage insurance.​​​​​​​
  • Require higher down payments.
  • Past finances can significantly decrease the odds of getting a loan.
  • If you don’t have a pre-existing relationship with a bank, the length of time to close on a transaction can be quite long.

НЕLОСs (Ноmе Еquіtу Lіnе оf Сrеdіt)

  • Typically there are no closing/appraisal costs or application fee.
  • Offer lower interest rates because they’re secured by your home’s equity.
  • Many times you can convert your loan balance to a fixed-rate whenever to lock in a certain rate.​​​​​​​
  • Once the line of credit is set up you can use the money how you’d like to for your deal.​​​​​​​
  • Upfront fees: Application fee, title search, appraisal, attorney’s fees and points.
  • Interest rates can rise unexpectedly.
  • Your home can lose value and then you’d end up owing more on your mortgage and HELOC combined than your home is worth.
  • Hidden fees.

--

--

--

I help companies grow faster. Seen on Forbes, Inc, & HuffPo. www.abhigolhar.com

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

The b-word (let’s talk budgeting)

I did a payday loan on line,and was unable to pay it back and my bank account was closed,and after…

Common Buyers Expenses

How do real estate Trust Sales work? Can I purchase a trust sale w/ a loan?

How to create your own real-time alert config on the ChartsWatcher Stock Scanner

Do people understand what money is?

Innovative Ideas to Make Money as A College Student

Why you may be losing money every second

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Abhi Golhar

Abhi Golhar

I help companies grow faster. Seen on Forbes, Inc, & HuffPo. www.abhigolhar.com

More from Medium

REAL ESTATE — Scam which generally takes very long time to expose

Eighth wonder of the world — Compound Interest

The Expense Ratio

My narrow miss of the UST collapse and the important lessons

A guide on how to consume, save and invest on almost every budget