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How to do Real Estate with Financing

Jul 8, 2008
This article will give you a quick overview of the four different types of financing you have available to you. With the number of deals out there, you will need different sorts of financing available to jump on different deals.

The first type of financing when talking about how to do real estate with financing is bank financing. You can go to your local bank and talk with a lending officer regarding loaning you money. You will normally have to talk with a commercial lending officer since fixing up properties would fall under small business. If you are buying investment properties, you can talk with your mortgage officer at your bank or at a mortgage company. This process normally can take a little longer than other types of financing and you can only do a few loans before you may be turned aside for having too many properties.

The second type of financing is friends and family. If you find a good deal, you may be able to talk with your family to scare up money. You can offer them a good rate of return plus having their mortgage secured by the property. You can use this type of financing for rehabs or for traditional buy-and-hold properties. The question is how much money you can find from them. Many people are not comfortable soliciting money from friends and family so think through this before trying it.

The third type of financing is hard money. There are hard money lenders who will lend you money to fix up properties. You have to pay a high upfront origination fee along with a higher interest rate. This type of financing is not contingent upon your credit report or how much you make. You need to have some money set aside to start repairs on the house as the hard money lenders will lend you money to fix up properties but this is held in escrow until repairs are started.

The final type of financing is private lending. This is exactly the same type of financing as friends and family except that you advertise for dollars and have individuals with cash put up the money for you. This is one of the primary ways to do real estate where you can minimize your costs. You do not have to worry about paying origination fees and your credit and financial history do not need to be discussed.
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