How to Raise Capital for Real Estate

Financing is the stumbling block of most real estate opportunities. With that said, “Cash is King”. Creative financing techniques can be used to close a deal, such as seller financing, partnership for equity share, lease option to buy, assumption of seller’s current loan, etc., but having cash in hand is ideal. You may have more financial resources at your fingertip than you think.

Difficulty: Moderate

Instructions

Things You'll Need:

• Basic understanding of real estate investment
• Locate a real estate deal with potential equity and/or favorable LTV
• Know all your numbers. Amount needed, cost to rehab, fair market value before and after rehab, loan to value, holding costs, etc.
• Willing to step out of your comfort zone and take a calculated risk

1. Here are some ideas on financing options. Personal funding from savings, 401K, stocks, mutual funds, ESPP. These are the are typically liquid and quick to access.

2. Private investors such as friends and family.

3. Hard money but these loans are typically charged between 12-22% interest and be ready to prove that the LTV is 70% or lower.

4. Home equity line of credit (HELOC). This approach would require real property ownership with ample equity.

5. Cash-out through refinancing which also requires real estate ownership with equity.

6. Self-directed IRA. If you have 401K or an IRA that does not allow investing in real estate, then roll it over to a company that will.

7. Non-secure signature line of credit such as credit cards. This is the least traditional choice for acquiring capital for real estate investment. However, some credit cards do offer 0% or low APR for short-term.

Tips & Warnings

• Visit www.reicircle.com for more ideas and resources for raising capital, as well as investment opportunities.
• Make sure you have an idea where or how to acquire capital before you start locating the property. The last thing you want is to locate a good property and cannot fund the deal on time.
• No matter which method you use to raise capital, study your options and be wise in your investment decision.