Real estate is one of the most profitable investment sectors. The cash flow you get from your properties can help you build wealth quite rapidly, and the returns are better than stocks or bonds. But the high costs associated with real estate make it a challenging investment for many people.
But, it’s not easy to find the money you need to buy real estate. How do you fund your next investment with your traditional bank loan options limited?
Here are some non-traditional ways you can fund your real estate investment:
- Friends and Family Investing
- Borrowing Hard Money
- Sell what you don’t need
- Asset-Based Mortgage
Friends and Family Investing
You’re probably not going to get a loan from your bank.
Maybe your friends and family members are more likely to invest in you, but they don’t have much money. Or perhaps they do have money, but they aren’t willing to lend it out because they’re afraid of losing their investment.
So how can you get the funding you need for real estate investing? The answer is simple: friends and family investing.
Friends and family investing is the non-traditional way investors fund their investments by asking for help from their loved ones. This type of lending is also known as private money lending. The lender does not work for a financial institution like a bank; instead, he or she is an individual who lends money based on personal trust and relationships.
Borrowing Hard Money
Hard money lending is a type of funding similar to those you may receive from friends, family, and acquaintances. The lenders of these funds are not part of any institutions, like banks or money-lending organizations. Instead, they’re private individuals who have decided to lend money to other people for various reasons: real estate investments.
If you’re ready to invest in real estate but don’t have the funds to do so, another option is commonly referred to as crowdfunding. Crowdfunding lets you raise money from many people, usually via the internet. Unlike hard money, which requires a substantial down payment and interest rate, crowdfunding only requires that you have a good idea and some social media presence.
Sell what you don’t need
Selling what you don’t need can be a great way to get the money you need for your real estate investment.
If you have an older car, for example, that you aren’t using and could sell for a good price, that would be an excellent way to get some cash in hand. The same goes for old furniture or other household items that you no longer use.
People are looking for deals on everything from cars to couches in this economy. If you have something valuable but is gathering dust in your garage or basement, why not sell it?
This is another useful funding source where, unlike traditional funding sources, your income doesn’t come in the way of your real estate investment.
Asset-based loans are available to individual investors and small business owners who need capital to purchase or refinance real estate. The lending process is similar to that of a traditional mortgage. Lenders will consider your assets and liabilities when determining your eligibility for an asset-based loan. However, they may not be able to use your income as a factor in their assessment because it isn’t considered reliable enough.