3 Ways Investors Get Money for Real Estate Investments
A couple years ago I had bought a condo and fixed it up to rent. I rented it for one year and then flipped it for a profit. I got the condo at a great price and was able to finance it using a loan from my 401K plan. This is just one way for investors to get money for real estate investments.
I know tons of people that are joining investor clubs, watching fix and flip shows on TV, going to auctions and diving into real estate investing. It is a very exciting thing to do and their are ways to get financing that are outside of the traditional methods.
Real estate investing is not always cheap and those great deals are hard to find. When you find that great deal and want to jump on it, you may lose it if you take too much time.
Today I am going to discuss 3 ways other than going down to your local bank, that you can get money for real estate investments.
Using Your Retirement Account to Get Money For Real Estate Investments
There are ways to utilize whats called a self directed IRA for real estate investments. This is something you will want to speak over with your accountant or retirement advisor. But, if done right you can utilize your IRA to invest in real estate.
You have to weigh the benefit of buying an investment property vs. just buying a REIT or real estate investment trust that could pay you a 10% dividend. It is much easier to just buy the REIT, just like you would purchase a stock. The REIT or real estate investment trust invests in a pool of real estate investments or specific real estate assets. This could be apartment buildings all the way up to medical office buildings and senior living facilities.
If you are wanting to specifically buy a physical property than talk to an advisor who can walk you through the process when utilizing your IRA or retirement accounts.
Using a 401K
Depending on the amount you have in your 401K plan, you can usually borrow up to 50% of your account balance. If you are buying a condo for instance for $60,000, You would need at least $120,000 to make this work. If you do you can just borrow the money, fix it up and flip it for say $85,000. Once you sell you just pay your loan off. It is a simple method that works well.
Private Money Lending
Private money lenders are individuals who usually have deep pockets and that want to lend their money out for a nice rate of return.
It is generally a win win for both the investor and the private money lender.
If you find a deal and do not want to wait for a traditional bank to finance it, using a private money lender can be a great option.
When you go to investor meet ups in your local area or just Google private money lenders for your area, you will find them.
Sometimes once you build up a good relationship with a private money lender and do a couple deals, they will even give you a better rate. Building these relationships is the most important part of establishing yourself as trustworthy to the private money lenders.
The advantage to using on of these private money lenders is that the real estate investments can be done quickly. Most will wire you the money and it is literally like having cash available in your bank. Sure you will pay a little hirer interest, but the time factor is what makes it so convenient.
Hard Money Loans and Peer-to-peer Lending
Another source of cash that is out there for investors to get a hold of is called hard money loans. These are like private money lending, but usually a hard money lender will charge a much hirer interest rate. This money is usually for someone buying a property to quickly flip it for a profit. Again, check your investor clubs, website or even Google Hard Money lenders.
For the fix up phase of your fix and flip or long term real estate investment you could get quick access to cash through Peer-to-peer lending. It is a great source for unsecured loans up to $40,000. So if you need to get money for painting, flooring, cabinets and supplies it can be a great way to access funds
To apply for a Peer-to-peer loan to get money to use for your property investment you can visit LendingClub.com
They are the largest of peer-to-peer lenders and have individual investors who fund the loans. It is worth checking out and can be a great source of unsecured personal loans that can be used for almost anything.
These are the 3 Ways Investors can get money for real estate investments. Good luck and let your next project be a profitable one!