Real Estate Investors: What is Your Financing Plan?
Whether you are brand new to real estate investing or have bought and sold many properties over the years, financing is always a top priority. You want to have your financial plan in order—especially when it comes to how you are buying properties and covering any renovation costs associated with a specific investment.
What is Your Money Source?
The first step is understanding where your investment capital is coming from. Are you paying cash for properties or are you financing them through another source? You may be taking out a mortgage loan or private loan. You may be working with a pool of real estate investors or getting private capital from a single investor partner. You could even work out creative financing solutions directly with a home seller. There are numerous methods for financing real estate deals. The key is knowing where your money is coming from and how it affects your investment—long before you start buying up houses.
Loans will come with fees and interest payments that can hinder profitability if your flip ends up taking longer than expected, or if you are holding the property as a rental unit. Investment groups and partners may have other demands affecting your timeline and budget, or they might want to have additional input that complicates your plan.
Cash is King for Real Estate Investors
Cash is almost always the best option for buying houses. It enables you to get transactions completed quickly, and usually allows you to purchase properties for a lower price than deals with secondary financing attached. Many seasoned real estate investors will be using the cash from one property sale to finance the next deal.
Creative Financing Solutions
Unfortunately, newer real estate investors may not have this kind of cash available and they have to get more resourceful. That’s okay if it’s what it takes to get you started on your investment business. Just be careful about any financing deals you are making. Know all the details and parameters attached to any private loan or capital provider. Factor interest and fees into your overall investment budget. Explore all your financing options and make smart decisions about where and how you get money for your business. Ultimately, you can make each deal more profitable than the last, and the cash you earn can go a long way toward future investments.
All real estate investors should consider joining the PropertyLark home buying network. We work with investors of all experience levels, providing valuable investment-building resources and networking opportunities to help you be as successful as possible.