Finding Money for Your Deals
There are lots of different ways to find money for your deals and I highly recommend understanding all of them as there is a time and place for each source.
Make sure you take your specific situation and resources available into account when choosing what type of financing to go with.
If you have it, kudos to you, that’s great! This is always a good source to fund deals but most people don’t have the cash to purchase properties. If you’re an investor and have liquid cash make sure you give it a rate of return. Sometimes it makes sense to use your cash for down payments, gap funding or carrying costs while using other money sources to help you buy more properties.
The biggest benefit of bank financing is getting cheap capital. However, bank financing can be hard to qualify for and not very flexible. They usually require larger down payments, good credit scores and full financial documentation. The biggest challenge with banks is they take much longer to close a transaction than other financing sources.
Access to private capital is a good, flexible source to fund deals. A private investor can be a friend, family member, someone from a social organization, and IRA or anyone who wants to put money into a real estate transaction. Private money lenders are a little harder to find and it’s harder to grow with as they usually don't have unlimited capital.
Hard Money Lenders
This is my favorite type of financing! Most hard money lenders are flexible, very real estate investor friendly and know the market extremely well. Their cost of money may be a little more expensive but its still manageable to make the deal work. They usually require smaller down payments and have a large capacity to do multiple deals with them.
There are many types of “creative” financing such as subject to, assumable mortgages, seller held back seconds. Creative financing can also be a hybrid of other types of financing including doing a joint venture with a money partner.
There are a lot of capital sources out there. What I like to tell investors are 'if you have a good deal, you will always find funding'. There is a time and place for each money source.