How To Get Funding As A Real Estate Investor

Real estate is an investment that many people swear by. If you buy the right house or apartment at the right price, you will find that you have a very successful venture. When you are starting to get into buying the right investment property, what can you do to fund it? You likely don’t already have a large savings and you likely won’t already be making profits from either flipping houses or renting out apartments. Once you have decided to take the leap and enter the rental, investment market, you will want to start considering how you will fund the beginning investments. If you make the right investments, you should be able to continue buying but right now you probably are starting from scratch.

To get funding as a real estate investor first decide what house you want to start with, then seek out lenders from a major bank or other lender such as venture capitalist, you can also request funding from friends or family or even try to crowd fund but that may not be as successful as more creative ventures. One of the best ways to fund a new real estate venture is to use your own money or put a down payment with a loan. If all else fails, you could look for owner financing. 


How to get funding as a real estate investor

Since you’re looking at buying a tangible item that will likely appreciate in value with the more work you put into it, you will have an easier time securing a loan than other types of new businesses. You will still need a plan, although you won’t likely need a business plan, but you will need to show what house you’re looking at buying and potentially other costs that will go into fixing it up. You will also need to show that it will be a worthwhile investment- will you flip it or rent it out? 

Typically, lenders need good credit, low debt to income ratio and to run a thorough credit check so if you have subpar credit or anything on your credit score that may give you a less than excellent interest rate, you may want to reconsider going this route. Paying a low interest rate will give you a higher ROI than having a higher interest rate. 

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Family and Friends

If you have friends or family members who have the means, going to them with your idea and what house you’re wanting may be another option. You can arrange an official, legal contract to pay them back and you will end up with paying the friend back instead of the bank, which can save you interest in the long run. 

It’s best to approach a friend or family member the same way you would approach a bank. Do not just casually toss it out and don’t act like they are made of money. If you want, you could even prepare a presentation to show them the investment, what you’ll be putting money into and how much you’re expecting to get out in the future- including adding future investments. Just don’t be upset if they say no and don’t act like they have a money tree in their backyard. Treat them the same, no matter how they respond because some people just have personal rules against loaning friends or family members huge amounts of money. 

If they do loan the money to you, make sure to pay them back. You could even make them partners in your venture and both of you sign the contracts. 

Crowd Funding/Government Grants

Turning to the internet may not be as successful for real estate investments than it would be for a creative endeavor, but you could push it on your social networks, and they can reach people not only in your own social circle who may be willing to donate a small amount to your dream but you can reach people from all over the world. You will need to make a strong case for why they should donate to you- because most of the projects listed on those sites are for people who are creating physical products and can offer physical rewards for donating. 

There are also a lot of people who can look down on real estate investors, so you will likely run across people like that as well so you will need to find ways to get past the protestors as well. 

Government grants are mainly extended to people who are buying their own residence, but if you look hard enough, you may find grants available for investors. They may require a commitment to affordable housing so if you’re not going to accept HUD or you’re looking to make a larger profit, they may not exist for you. 

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The best way to get funding is through your own savings and investment income. You may not have another home to take equity out of, but you likely do have something in savings. If you don’t have a savings set up, set up a special savings account that you can keep from touching in order to save the down payment. Banks are much more likely to give loans to people who are willing to put down a sizable chunk before taking the rest of the money out as a loan. 

You may also be able to find a partner to help you with the costs. If you have a good friend or acquaintance who is an experienced investor, they may be willing to go in with you to help you get on the ground. 

If you can find a partner, you will likely have to go into business with them but it will also give you the experience and the start of the financial gain to help you get the money together to start your own investments. 

Owner Finance

How to get funding as a real estate investor

One last possibility is finding an owner who will be willing to finance the cost of the house. You will not have to go through the mortgage process, but it could be risky. You may end up with a higher interest rate than if you go through a bank and you may find that the person isn’t as friendly now that you’re indebted to them. You could also find that you are more in danger of losing the property because an owner may be stricter than a mortgage company. 

As with any other route you go, make sure you come to a total agreement and both of you understand your terms in full. 

There aren’t as many ways to find financing if you’re looking to step into real estate investment as there are in other ventures, but if you look hard enough you will be able to find ways to increase your ability to invest. You may want to set a target date, look towards the future, and determine the location- then save the money to either buy an investment home straight or put a down payment down. 

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Frequently Asked Questions

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What are the Advantages of Accepting HUD?

If you’re wanting to rent a house out, maybe you have already decided you do not want to accept HUD. If you are on the fence or thinking seriously about accepting it, here are a few of the benefits. 

  1. HUD requires certain living situations, some people recommend to rent HUD homes even if you don’t receive HUD because people know HUD houses have to pass inspections and the inspections can be kind of strict. It can be a bad thing if you find them nit-picking everything about your home and can be expensive to rent out but the inspections will show that you’re serious about the quality of your home. 
  2. HUD always pays. As long as you have a tenant, you will get paid. Sometimes the rent may be late, but you will always get paid and in some cases, HUD pays above market value. 
  3. People who have HUD vouchers have to maintain certain living conditions as well as behavior- certain strikes can get their voucher taken and leave them homeless. That voucher can hold a lot for them and make them want to maintain certain positive behaviors. 
  4. People who receive HUD are lower income, they don’t have the ability to up and jump to different houses as easily as higher income tenants and if they find a good landlord, they are more likely to stay longer-tern. 

Should You Invest in Multiple Houses?

You may be wondering if you should stick to buying one investment property or if you should buy more than one. You may have equity in one house and you’re thinking about using it to buy a second, so should you? If you have the time and will be able to make enough to maintain both (or more) houses, when you own more than one you will find a higher ROI. If it’s just a side venture, you may want to stick with the one- like if you inherited the house and decided to rent it out, but if you’re seriously looking at making investment properties a steady stream of income, you will find better results with more than one. 

To learn more on how to plan your own real estate business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.