Regardless of whether you are someone who is venturing into the world of real estate investment for the first time or trying to expand your portfolio, you are going to need capital for the purchase. There are several ways to do that, depending on your situation.
If you are someone who has cash-on-hand sitting in a bank account, don’t be afraid to use it. It’s important to remind yourself that you have already decided to take the bold step of entering into the real estate business, and a steady stream of money coming from tenants will serve you much better in the long run than a stagnant amount in the bank.
Consider Private Lending
If you don’t personally have the funds but you have friends or family who do, you might want to consider the path of private lending. This way, you and the other party can make your own rules that are not regulated by any banking institution or government. Agreements should definitely be drawn up regarding a payment structure. There are of course other important facts to consider, including whether it will affect your relationship in the long-term.
Tap Into Hard Money Loans
Hard money loans are another option. They differ from bank loans because they are secured by real property and not as picky when it comes to accepting who they lend money to, so your credit rating can be slightly less than perfect. Be prepared to pay more because their interest rates are generally higher than at a bank.
Research A Home Equity Line of Credit
If you are a homeowner, there is something called a home equity line of credit (HELOC) that you might want to take advantage of. By using your home as collateral, you can take out a revolving credit loan at a low-interest rate, and then use that money to make large purchases. Revolving credit means there is no fixed number of payments, as opposed to installment credit.
Utilize Credit Cards
Credit cards are another example of revolving credit, and many people are unaware that certain business credit cards have a zero percent interest rate for a substantial period of time, sometimes beyond a year, as well as no annual fees. There are even perks, such as cashback reward points or air miles.
If you have a 401K through your place of business, sometimes you can ask to borrow off it. The added bonus is that you are essentially paying yourself back as you pay installments since the money is going back into your own 401K fund through your company.
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