Creative Real Estate Investing

The most common excuse many people make for not investing in real estate, besides fear of taking action, is lack of proper funding. The fact is it has never been easier, or more lucrative, to invest in real estate than right now. In times past, the options for private money loans were limited to conventional loans through banks or high interest loans through hard money lenders. However, the banks require a hefty down payment (20% for an investment property), a mountain of paperwork, and an underwriting process thats sure to kill your deal one way or another.

The other option has typically been through hard money, although the rates are usually much higher than through banks, which means the investor needs to have substantial margin in the deal. Today, as we know, the lending environment has tightened significantly and credit markets are slowly beginning to thaw. Lenders that are willing to lend money today typically require significant equity from the borrower and outstanding credit.Furthermore, hard money lenders are charging borrowers higher than normal rates because they know there’s nowhere else to turn.

While the current economic downturn has created issues with investors, it also offers outstanding investment opportunities for those who recognize this. This new environment has led to the creation of transactional funding, which is frequently used to fund short sales, and private money loans, which is typically provided by individuals. Private money loans are preferable to most investors because the terms are generous and the investor has more control over the deal.

Private money loans can be raised in a number of different ways. Brokers can pool funds from wealthy individuals or investors, investors can approach individuals about loaning funds, etc. Remember that many investors are scrambling to find safe investments to place their funds, especially given the volatility in the stock and credit markets.

Keep in mind the perspective the private money lenders may have. Where do you think he would rather put his money? In the stock market, which has been more erratic than any time in recent history, or an investor that’s purchasing incredibly low risk real estate investments that have 30% + equity and, by the way, is secured by the property? Seem like a no brainer, doesn’t it? That’s primarily why investors are successful in getting private money to fund their deals.

While banks will eventually open their doors and begin lending again, private money lenders offer a new breed of lending that’s probably going to stay around.

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