If you are reading this article, my guess is you’re in the real estate investing business or you’re thinking of getting started in the business. And like any other businesses – funding is the lifeblood of a fix and flip business. Real estate investor financing can help you overcome the deadly and more often than not, common problem that cripples most business operations – lack of adequate start up capital and lack of cash flow
In real estate, there are typically two types of loans – the conventional loan – the one you get from the bank or credit union to buy your live-in house. The other type of loan is the investor loan, which is not so main stream because it is usually for people who are in the investing business.
Investors have a couple of options when it comes financing their deals. they can go out and get what are called Private Money loans. These are funds you can borrow from private lenders to fund and fix your properties. Typical lenders for this type of real estate investor financing include family members, friends, other investors and everyday people with deep pockets. These are individuals who have money in their bank accounts, retirement funds or some other liquid asset which they realize is not earning a good return.
if you can demonstrate and convince these individuals that putting their money in a piece of property is a better option for them, they will help you overcome that all too common investor ‘financing problem’ faced by many aspiring investors. They can fund your deals without you ever walking into a traditional bank.
Real estate investor financing is referred to by different terms depending on the lender. If you’re working with a professional investing outfit, they might call it a hard money loan or an equity loan. the concept is the same – you get funded depending on the amount of equity you have in the deal. And because it’s a short term loan and it is such a convenient form of financing, the interest rates are usually higher than conventional real estate loans.
The other main difference between a conventional loan and investor financing loans is the qualification criteria and lending guidelines. With a conventional loan, you have to have good credit and you have to be able to show proof of income. Your interest rate on a conventional loan is relatively lower and you can pay back the loan over a longer period of time
With investor financing loans, your credit is usually not an issue. You don’t necessarily have to show proof of employment because it’s understood that you’re in the real estate investing business.In addition, real estate investor financing loans are typically made for less than one year and you get approved based on the equity in your deal.
At the end of the day, investor financing loans are worth having if you want to take your business to the next level. They are convenient, they allow you to buy properties and profit fast. You definitely must have them in your real estate investing toolkit.
Manny Mazvizvo is a Real Estate Investment Funding Expert with over 6 years in the funding business. Today, he works with over 83 lenders across the country to help Real Estate Investors and Small Business Owners secure financing for their investments. He is also the publisher of the “iFix and Flip” newsletter. He has written a handy Investment Loan Approval Tip Sheet entitled: