More often than not, investors struggle with which real estate funding options to go with. We are going to give you a brief introduction to the different options that are available. Based on our experience, not all methods will work for every investment—the more options you are aware of, the better equipped you will be to make successful business decisions. Making a good choice in which way to go with your investment will create a win-win solution for everyone involved. It is important to remember that in order to make a successful transaction, the buyer and seller need to be satisfied with the deal.
The best way to succeed is to keep an open mind and to work as many real estate funding options as possible until you find something that works out in your best interest. Remember you do not have to be rich or have superior credit to become a real estate investor. Some of these real estate funding options may sound confusing while others will make perfect sense. Some will be completely new to you while others may be quite familiar.
Option #1 Private Lenders
We think the great thing about Private Lenders is that they come in all shapes and sizes when they offer real estate funding options. Because of the broad range of mortgages they fund, Private Lenders are a good option. Mortgages, whether conventional, FHA, VA, fixed rate, adjustable-rate mortgage (ARM), balloon, or even a Home Loan Payment Relief Mortgage (HLPR) are available through Private Lenders.
Option #2 The Seller
Just so you know, The Seller is a funding option that is best chosen when you are either doing 100% owner financing or when you need the seller to hold a second mortgage for the down payment. Furthermore, while financing the down payment can have several options to secure it, a second mortgage is the most popular. With a second mortgage there is a slightly higher than standard interest rate in exchange for the seller helping you purchase the property with no money out of your own pocket. Also keep in mind, because this transaction may benefit you later on in another deal, make sure you always send your payments in on time to the seller so you can use the seller as a reference.
Option #3 Investors
Our experience embraces tons of investing. Investors are a great funding option because they offer a way of securing cash to purchase property without actually using your own money. The good news is that Investors want to see you succeed and love it when you have been successful in other deals to prove that you are a low-risk for them. The bad news is that Investors tend to charge high interest rates. However, you may be happy to know that Investors are more flexible in terms of payment options than conventional lenders such as banks.
Option #4 Promissory Notes
We want to explain a little about Promissory Notes in real estate funding options. Promissory Notes are typically used when the seller is employing a second mortgage for the purchase of the property. What this means is that you are promising to pay a certain amount as well as a specified amount of interest at specific intervals. What this means is that this method applies if the promissory note is written for one large balloon or lump sum payment. While this is most common with sellers, it is also used with other investors. It is a good idea to create a good sound business plan as well as complete investigation into the property in order to make this real estate funding option work successfully.