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Posted over 5 years ago

How to Use Other People's Money in Real Estate Investing

How to Use Other People’s Money in Real Estate Investing

As a woman interested in real estate investing, the big question is how to find the money to get started and keep growing. One way is to identify investment opportunities that don’t require start up cash, like wholesaling and lease-to-buy options. However, one of the best ways to enter the real estate investing market is by using other people’s money or OPM. When you explore how to use OPM for real estate investing, you’ll find it’s a great way to not only get started in real estate investing but also to continually grow your business.

What is OPM?
Investing with other people’s money is a way to pay for real estate investment opportunities privately without using traditional financing options from a bank or mortgage lending company. These types of private lenders are most often silent partners that have the money to invest in real estate in order to benefit from the financial return. However, they usually don’t have the time or interest in doing the work of real estate investing.

Investing through OPM may include seller financing in which the seller keeps the mortgage in their name. The investor then makes payments to the seller to cover the monthly mortgage payment. An arrangement is made so that the investor has rights to the property, including the right to sell the property for a profit.

Another option for investing with OPM is with an equity partner, which is a cash investor. For some investment opportunities, multiple equity partners are established to create a pool of money for the investment. With cash investors, they receive either a percentage of the return on the real estate deal or interest with repayment.

As you build your real estate investing network, your private lender options should grow along with your portfolio. One way to learn more about these types of opportunities and how to benefit both you and the investor is with a solid real estate investing coach. Also, if you are serious about real estate investing with OPM, take the time to use online resources like eBooks, webinars and video courses. The greater your knowledge, the more likely you are to have positive results.

Reasons to Use OPM for Real Estate Investing

The main reason to use other people’s money for real estate investing is because as a new investor your access to cash is limited. Finding private funding sources is a great way to build your portfolio and your own cash reserves for future investment opportunities.

Also, when you use OPM, your risk and exposure is limited. While both you and your private lender have the potential to see positive gains, with real estate investing there’s always risks. When you use other people’s money, you limit your personal risks. However, in order to have long-term success, you must be serious about your investments. If you get a reputation for losses, it’ll be difficult to continue to finding funding options.

When you are starting out in real estate investing but don’t have the money or credit to finance the deals, seek out opportunities to invest with other people’s money. This is a win for both parties.

Types of Real Estate Investment with OPM

  • Seller Financing: The seller maintains the mortgage while the buyer gains the right to sell the property.
  • Land Contract: The seller holds title until conditions of the contract are fulfilled by the buyer.
  • Subject To: The existing mortgage stays in place, but title is transferred to the new buyer.
  • Equity Partners: Joint venture between a partner and the investor.
  • Private Money: May include real estate syndication, self-directed IRAs, insurance funds and local investors.
  • Bartering: May barter any number of options, like services, products or properties.
  • Real Estate Commission: Options to borrow or reduce transaction commission.
  • Create Paper: One party carries the note to facilitate the closing of a transaction.
  • Lease or Option Contracts: Includes, lease option to buy, master lease and regular option agreements.

How to Build a Successful Real Estate Investing Business

Identifying and using other people’s money is one way to build a successful real estate investing business. In fact, even after your business is growing and viable, creating OPM real estate deals may continue to be a smart strategy for your business.

However, in order to see long-term growth, you must treat your real estate investing ventures as a true business. This means that before you begin you need to create a business plan that identifies your target investments, funding sources and marketing plan.

Also, you need to invest in learning about the industry in order to gain knowledge about the details for real estate investing. Many options are available to grow your understanding of real estate investing as a business. These include: real estate investing mentors, eBooks, blog articles, webinars, online courses and videos. Invest in yourself so that you will be prepared for real estate investing.

If you are serious about real estate investing, you must have the discipline to live below your means in order to have money to put into your real estate investing business. Also, smart real estate investors save a percentage of their profits from each deal to reinvest in the business. This is key to long-term success.

Finally, a successful real estate investor will both specialize in specific types of deals while also diversifying their portfolio. This demonstrates both your knowledge and breadth within the real estate investing industry.

With discipline, dedication and determination, you can find success with real estate investing. As you start out, look for investment opportunities using other people’s money to lower your risks and find the financing necessary to build your business.

Comments (3)

  1. I have a question, when I see multi-family properties for sale with a listing agent, how does the agent get paid if I want to ask for seller financing?

    What would the process for that be? Submitting an offer?

    1. If there is a listing the seller still has to pay a commission to the agent. So the seller has to work something out with the agent.