Real estate investing can be quite profitable, but in order for it to have that opportunity, you first need capital. This is what will get your foot inside the door. It'll allow you to purchase that run down foreclosed property, invest in that multi-family property, and even pay the contractors for the latest flip you purchased. Put quite simply, there isn't much you can do as an investor without it. Here's a quick look at a few ways to get it.
Investment Property Loan
There are a number of mortgage loans that you might want to consider when looking to fund your next project that's real estate related. Unlike loans that give you immediate cash for emergencies, these loans provide you with the capital you need in order to purchase real estate, and as such, they're more difficult to be approved for. Depending on the kind of property you're investing in, you might get a conventional loan or an FHA loan. If you'll be renovating the property, you might even take a look at a 203k loan.
Hard Money Lender
If you're of the opinion that real estate is a smart investment for you and you're in search of some capital to enable you to invest in it, maybe a hard money lender would be a good option. This is a sort of private financing option that comes with qualifying standards that aren't quite as stringent as some of the others that offer your typical mortgage loans.
However, as with most things, there is a catch - the interest rates tend to be higher. Due to this, if you're just looking to finance a short-term thing for, say, a fix and flip, this might be the way to go, but as a long-term repayment option, this probably isn't the best one.
Private Money Lender
Not everyone needs to go through established lenders and banks to get their projects financed. Some people can go to friends or family members, or other private lenders. Getting a loan in this manner doesn't mean that you'll cut out the interest though. Most of the time, it'll need to be paid back with some sort of return on the investment. The good thing is that there doesn't tend to be any sort of red tape or a difficult process of qualification. Also, the cash will probably be available rather quickly.
Crowdfunding
You may have donated to a Kickstarter or GoFundMe campaign before. Real estate crowdfunding is a sort of similar strategy. You'll need to pitch your project on one of the crowdfunding platforms and investors who're interested have the ability to contribute to your project if they like. To their benefit, they'll get a portion of the profits of the project.
Home Equity
That one is an option only for those who already own property. If this is you, you might be able to tap into the equity you've built up in your existing home loan and utilize that money to fund the next real estate you want to invest in or to make renovations to one you've already purchased.
Bottom Line
There aren't many investors who always have all of the cash they need right at the tips of their fingers. It's a good thing that raising capital to invest in real estate is actually a bit easier than you might think. In addition to what you've read here today, you also have the options of P2P lending and even partnering up with other investors. Whatever you do though, weigh the pros and cons of each available option before deciding so that you know exactly what you're getting into and what you can expect to get out of it.
