The Six Types Of Funding That Make Real Estate Investing Possible In 2020
There is more than one way to fund a property. In fact, each stage has its own type of financing. Which is right for you? Consider how you can connect your own buyers with the right money for the next step and make everything run more smoothly.
1. Seller Financing
Both on the front end and exit there can be strong reasons for using and offering owner financing of some type. It may support a higher sales price, minimize tax exposure, create new income streams with strong returns, speed up sales, and fill the gap when others won’t loan on a specific property or scenario.
2. Personal & Business Lines Of Credit
Even when mortgages seem easy to get, there can often be a funding gap in paying for marketing for leads, due diligence, and earnest money deposits. Some may also need extra cash for down payments, closing costs and repairs. Personal and small business lines of credit, credit cards and loans can temporarily provide the needed liquidity to get deals done.
3. Transactional Funding
Real estate wholesalers use transactional funding to complete legal double closings, protect their profits, and scale fast. It can offer 100% of financing needs, with virtually no qualifying.
4. Rehab Loans & Hard Money
Real estate wholesalers are often flipping their deals to rehabbers and landlords who will need to do a substantial amount of work to bring the property to rent ready status. These specialized short term loans can help fund deals in poor property condition, even if you don’t have great credit or fit the typical mortgage criteria. They may also often include funds for making repairs and improvements.
5. End Loans
Whether flipping houses or building a rental portfolio, investors ultimately need to sell or refinance these assets. Retail buyers and landlords need long term financing at good rates. These loans typically come from national mortgage lenders and brokers or small regional and community banks. They are harder to qualify for and take longer to close.
6. Institutional Funds
Big funds funnel money from domestic and international investors into real estate and mortgages. They may use these funds to make portfolio loans. Or buy bigger income property portfolios and pools of mortgage notes. All providing more liquidity to the industry and freeing up equity and capital to be reinvested.
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