8 Ways to Fund Your Next Real Estate Project

Real estate investing allows you to finance your investment with endless options, from mortgages from banks to rental property financing from lenders with minimal fees, interest, and fairly low down payments. The two best ways to get involved in real house flipping, renting out properties, or finding a real estate investment group if you have big plans. Unfortunately, many people think they don’t have the startup capital to purchase their first house to flip. However, with so many different types of funding options available to you, almost anyone can start investing in real estate. Here are a few different ways to fund your next real estate project:

1- Private Investors

You don’t need a mortgage loan to buy a property. Instead, you can use private funds from family, friends. And people you know with the promise you’ll pay them back with interest. Of course, this method takes trust, so you may not be able to get the funds from strangers. But if you have a good track record and people view you as someone they can trust. You can convince others to give you money for a lucrative opportunity.

The best part about this funding method is that you can combine it with other forms of financing. Like getting a mortgage from an online lender. You can put together small commercial deals and buy people out or find contractors. Use the money you got from private investors to ensure your project’s success. If you have big dreams for a real estate investment project. Consider crowdfunding to get the funds you need to build your real estate development.

2.    Portfolio Lenders

Whether you’re looking for residential or commercial loans, your local bank should always be one of your first stops. These lenders keep loans in their portfolios and can make good financing partners for your next project. If you work with a bank you trust and have a financial advisor with them, make sure to take advantage of their knowledge. Of course, you’ll need to report your income to get these loans, so you’ll have to share tax returns which include your itemized deductions.

3.    Conventional Mortgage Loans

Conventional mortgage loans are another popular option. While some lenders may not partner with house flippers, they will partner with rental property managers. Unfortunately, conventional lenders have tight guidelines, so you must have a good or better credit score (typically at least around 620) to get a conventional loan. In addition, most conventional lenders won’t lend to you if you have more than a few mortgages on your credit report, so you’ll need to choose projects wisely or pay them off as quickly as possible. However, conventional rental property mortgages are less expensive than many other financing opportunities, offering lower interest rates and closing costs. Lastly, if you decide to go the conventional mortgage route, you will need a hefty down payment to qualify.

4.    Seller Financing

A seller financing is great for many types of real estate projects, but it’s not something you should count on. The seller financing is a type of loan that the seller gives to the homebuyer and can be used for renovations. Ultimately, investors can choose to work directly with sellers who have vacant homes, renovate their properties, and rent them out while giving the seller a piece of the action, helping the seller generate revenue without lifting a finger. However, it can be difficult to negotiate with sellers because most people aren’t aware that it’s an option.

5.    Hard Money Loans

Money loans are good for initial property purchases even though they come with higher costs and often higher interest rates. A hard money loans are easier and faster to fund than loans you can get from a bank, and hard money lenders don’t often require the same types of financial information. Instead, they lend the money based on the value of the real estate property.

Unfortunately, these lenders charge higher rates because the loans carry more risk for them. However, if you need a loan fast and think you can flip your property quickly, these types of loans might be right for you.

6.    Lines of Credit

If you have equity in your home or other rental properties, you can take out lines of credit, offering affordable financing for new projects. If your equity is in your primary residence, you can take out a home equity line of credit (HELOC) from traditional banks or online lenders. Meanwhile, if you have equity in rental properties, you can take out a HELOC against those properties to fund your down payment or pay for a new project in full. Once the new property builds equity, it will allow you to pay back the original line of credit.

7.    Crowdfunding

If you need funding for any type of project, you might consider crowdfunding. Crowdfunding real estate platforms are becoming more popular, allowing many different types of investors to get involved in real estate. However, while these websites offer affordable financing for flips, you can expect to pay high-interest rates and down payments.

8.    House Hacking

House hacking allows you to pay off your home by letting someone else live in it and pay rent. Ultimately, if you buy an apartment complex, you can live in one of the units and let the rents of the other tenant cover the mortgage. This can be especially beneficial if using an FHA or conventional loan. While this method doesn’t necessarily help you pay for your next real estate project directly, it does allow you to free up some of your funds for other projects because you don’t have to worry about the mortgage on your primary residence.

Final Thoughts

There are many ways to finance your next real estate project, but it’s up to you to understand all the details and terms involved to make the best decision for you. Whether you’re renting property or flipping it, you must find the right funding to ensure your project’s success. Remember, at the end of all of this, you must walk away with a profit.