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All the Ways to Fund Your Real Estate Deals

Jun 21, 2008
Business Partnerships: One of the creative ways to fund your real estate deals until you can actually qualify for financing is through partnerships. Just remember, if you're partnering with someone; make sure you know who you're getting in partnership with. It's one thing to do a partnership on one deal and another thing to create a partnership where you're going to buy multiple deals.

Even if you know the person you are going into business with, treat each transaction as a separate partnership and only go in partnership with them per transaction because you never know what can happen. Remember a partnership is like a marriage and you're tied to that person until you've dissolved that partnership or sold the property. It's always wise to partner with someone who has a talent or skill that compliments what you do.

For example, one person may be able to find the deals and put the deals together, find the buyer, find the seller of the property, find the buyer for the property, the other partner may be good at rehabbing properties, estimating rehabs and actually doing the work. Find somebody that's going to compliment you.

Cash Partner: A cash partner is exactly what it sounds like. It's a partner that has and will be putting up their cash to fund the deal. You can structure the transaction and profits any way you want. You could split 50/50 or you could offer your partner the first 10-20% of the profit. You could also offer your partner a minimum of 10% return on their cash PLUS a percentage of the profits at the end.

Credit Partner: A credit partner may not have any cash but they have good credit and can qualify for a loan to fund the property. These are easier to find than cash partners. If you use a credit partner just remember that you may have to put the property in the partners name in order to get the loan. I suggest that you know them very well or have a good agreement in place prior to.

Hard Money/Rehab Loans: "Hard Money" loans or "rehab loans" refer to non-conventional real estate loans. They're usually funded by private money sources and specialty lenders. Interest rates and points on such loans are usually higher. Terms usually range from 3 to 12 months. Hard Money loans have one basic requirement. There has to be some substantial equity in the property to give the lender a reason to invest their funds in an otherwise risky venture. "Hard Money" is a cost of doing business and an effective method to use as a real estate investor.

Seller Financing: Another good source to fund your deals is to get the seller to finance it. This won't work all of the time as it takes a special situation to work. One of the things you always want to ask the seller is what will you do if you don't sell the property? If they say rent it then it's a good seller finance possibility.

Try and get the best terms possible from the seller based on what they'd get with a bank interest rate. Here's another thing to ask What will you do with the money when you sell? If they say put it in the bank then compare the rate of return they'll get versus a higher rate for giving you seller financing.
About the Author
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