Venturing into the real estate market could be both fulfilling and highly rewarding. If you’ve been planning to get into the real property market, it’s probably high time to make your dream come true. The real estate business is one of the most profitable ventures, but raising the finances to help you start could be challenging. You need capital to get yourself established.
If you don’t have sufficient capital, you’d need to think of ways you could raise the required amount to invest. There are various means online to make money fast right now. You could check them out and begin saving today for your real estate business.
Real Estate Investment And Its Benefits
Real estate investing, though costly, has many known advantages. These include the following:
- Real property appreciates over time.
- Real estate investment offers equity building.
- You could enjoy predictable cash flow.
- It could be a hedge against inflation.
- It provides high returns.
- You could enjoy tax breaks when depreciation hits.
- It’s a good way to save for a college education.
With these in mind, you’re probably more pumped up to get your real estate investment plan started. In this article, you’d learn some of the ways on how people have raised capital for their real estate business.
Loan From The Federal Housing Administration
A Federal Housing Administration (FHA) investment loan could be a good bet for you if you need a loan with low requirements. Lenders usually attach lenient terms to this kind of loan as the loans are insured by the FHA. The down payment to receive an FHA loan is 3.5%, while other lenders could charge you 20%.
However, you’d need to have a FICO score of 580 or more to receive this loan. This FICO score might not be difficult to have if you’ve been paying your previous loans well. FHA loans would favor you because they’re set aside for people in the real estate market. Another condition for the loan is you must use it to buy a multifamily property, live in one of the units, and rent out the rest.
This is a good arrangement as you could earn an income while you’re living rent-free. After some time, you could vacate your unit and have it rented, too. So to buy a multifamily home without money, you could consider getting an FHA loan.
To get a loan through peer-to-peer (P2P) lending, you have to post your project on a P2P lending platform, where you would get connected to an investor. This investor gives you the money you need, and then you organize how to pay it back. You’re supposed to pay back the money with interest, of course.
But before taking a particular loan, ensure you’ve read the terms and conditions as P2P loans vary. Try to do a background check of the platform through reviews from other investors.
Applying for bank loans is probably one of the most preferred methods by a lot of real estate investors. In today’s market, you could easily get a bank loan for a real estate venture as the real property market has continued to boost bank incomes. The challenge you may experience, however, is being subject to an evaluation of your debt-to-income ratio, assets, and credit history before you’re granted the loan. Thus, you must have a good credit score, minimal debt, and a stable income.
Home Equity Loans
A home equity loan would apply to you if you have another property. You could use the equity of your existing home through a home equity line of credit and utilize the fund for your real property needs or the expenses for rehabilitating it.
Private Money Lenders
Private money lenders are people who are willing to give out money and get some interest as a way of investment. They work independently from banks and other money institutions and would deal with you directly. They generally don’t have many restrictions, Thus, accessing this loan is much faster than getting loans from banks. Finances from private lenders could be used to refinance a property or buy a new one.
Hard Money Lenders
Hard money lenders are semi-institutionalized money lenders. Many real estate investors seem to be leaning toward this type of loan. This is because these lenders would charge you an interest rate that’s between 12% and 15% and would require you to pay a single fee to process the loan. You could receive the funds almost instantly, unlike with banks. You may use the money from hard money loans for the following purposes:
- To rehabilitate your real estate gut
- To perform a quick real property flip
- To finance your first investment in real estate
- To finance your investment, especially if you can’t access mortgages because of a poor credit score.
Financing your real estate investment may not be as difficult as you might think. What you need is some research on where you could get financing and to gain a proper understanding of the real estate markets. You also need to ensure you’re getting the right terms and conditions for your loan. If it’s your first time in the real property market, try to seek the professional services of a real estate consultant, who could help you navigate the steps properly.