How to Get Money to Invest in Real Estate
This economy has made investing in real estate a profitable venture for many. Prices are low because of the foreclosures, making it a smart time to take advantage of this market. Under the right terms, you may not need a lot of money for down payments or even closing costs. However, it is important to know where you can find the capital when needed. Many investors choose to borrow the funds rather than risk their own savings. Others prefer having more control and use their own money as much as possible. The funds you use depends on the partners you share the investment with.
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Things You'll Need
- Tax information on all savings, 401K, IRA accounts you have now
- Access to online research for investment clubs and other real estate professionals
Instructions
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Use the money you have available through your own resources. This could be from a savings account, 401K account and IRAs. Before you draw from these sources, educate yourself on how to use your own funds to invest in real estate. Know what tax ramifications there are if you take funds from these accounts too early.
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Access the equity in your home. You can refinance your home through your existing mortgage holder or other mortgage brokers. Know the value of your property by getting opinions of value from an area real estate broker. You will be able to access 70 to 90 percent of your equity, depending on the lender's criteria of credit and job stability.
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Establish a line of credit at your bank. The amount you can access will depend on your bank's policies and your financial situation. By setting up a line of credit, you can access the account and be charged fees only on the amounts you use. The remainder will not be charged until you withdraw the funds.
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Borrow money from family and friends. You can pay them interest on the loan or pay interest and principal until the loan is paid off. Or you can make them a partner in your investment and pay them when the property sells. If you choose this option, be sure to have all your contractual agreements in order prior to making the purchase.
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Join a REI Club in your area. Members include real estate owners as well as people with investment funds. Meet them and learn how they access their funds. Find out what the criteria is to make them comfortable in lending you money. This type of lender will typically loan money at a high interest rate, but can fund the loan quicker than a bank. They don't have as strict guidelines for their money as a bank, so they do charge more for using it.
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Ask the seller of the property to contribute. Some sellers are open to carrying a portion of the down payment. This type of transaction requires knowledge of secondary loans. Consult an investment real estate professional for ways to pursue seller participation.
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Tips & Warnings
Be familiar with the type of property you want to invest in. Know the approximate amount of money needed to pursue the transaction. Consider all the costs including down payment, closing costs, fix up and repairs needed and reserves.
