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5 Key Tips to Finding the Best Real Estate Financing Solutions

After a roller coaster of a year with the pandemic, the real estate market has bounced back with surprising speed. In fact, the market is red-hot in 2021, with more investors than ever before seeking real estate financing.

Are you hoping to dive into the world of real estate investment this year? To the uninitiated, it’s easy to feel overwhelmed.

What do real estate consultants do? What’s the difference between construction loans and bridge loans? Most importantly, how can you find the right real estate financing solutions for your needs?

We’ll answer these important questions and more, so keep reading!

1. Speak With Real Estate Consultants

If you’re just dipping your toe into the world of real estate, it’s a good idea to talk with a consultant. These professionals understand the market inside and out and can offer invaluable insight to help you begin your journey.

Real estate consultants offer both financial and investment advice for all stages of the buying and selling process. Unlike realtors, they’re not involved in the process itself. Rather, they advise clients about asset management using the latest market analyses and modeling.

Some consultants, such as MBPartners, specialize in commercial real estate investments. Others help investors obtain real estate loans to purchase residential rental properties.

Once you’ve determined the investment path you want to pursue, you’ll be in a better position to choose the right consultant to work with.

2. Separate Fact From Fiction

There’s a common misconception that you need a lot of money on hand to begin investing in real estate. Although a nest egg certainly can’t hurt, there are many ways to get real estate financing even if you don’t have a huge savings account.

As an example, Warren Buffet (consistently ranked as one of the richest persons in the world) financed his first real estate deals through family and friends. The same is true of Larry Silverstein, who teamed up with family to buy distressed properties in Manhattan.

The result? He eventually built the World Trade Center complex and one of the biggest real estate fortunes on the planet.

You may not become the next Buffet or Silverstein, and that’s okay. The point is: You can do a lot even if you only have a little.

For example, let’s say you want to invest in a multifamily rental property. If you qualify for an FHA loan, you and 10 family members could pool as little as $1,000 to buy the property.

How’s that for savvy real estate financing solutions?

3. Try for an FHA Loan

Since we mentioned it, let’s explore one of the easiest ways to get started in real estate investment. The FHA loan allows first-time buyers to put down as little as 3.5% to buy a property.

That’s right! You don’t have to save anywhere near the traditional 20% downpayment. As long as your credit score is above 580 and you can secure the 3.5% (even though a loan from family or friends), you should be able to qualify.

How could this work in the real world? Let’s say you want to buy a multifamily property in Jersey City — just a 10-minute train ride from downtown Manhattan. Believe it or not, you can still find three-family houses in the neighborhood in the $250,000 range!

You can buy the property, live in one unit, and rent out the other two. All you’d need to come up with is $8,750 for the downpayment. Then you can sit back, live rent-free, and enjoy life while your property value soars.

4. Consider Other Federally-Backed Real Estate Loans

If you don’t qualify for an FHA loan, there may be other federal loans to help you secure the real estate financing you need.

For example, are you an active duty military member or a veteran? A VA loan allows for 100% financing of a property purchase, meaning you don’t have to come up with a downpayment. There’s also no requirement for private mortgage insurance, and the seller pays the closing costs.

The USDA also offers loan programs to families who want to invest in rural areas or farming communities. The definition of “rural” is quite liberal, so you may also be able to qualify for a property in the suburbs with a USDA loan.

5. Bank Loans & Private Financing Options

Of course, no discussion of real estate financing would be complete without mentioning traditional real estate loans as well. Whether through a bank or a private lender, there are countless options available to buyers.

Here are just a few avenues you could pursue:

  • Hard money lenders: Short-term loans for investors with little capital or less than perfect credit
  • Private money lenders: Borrowing capital from friends or family with a specified payback period and interest rate
  • Cash financing: Available for investors who want to buy a property free and clear
  • Self-directed IRA accounts: Tapping into your personal IRA account for capital
  • Peer to peer lending: Low interest rates and a lot of flexibility for the final funding stages of a project
  • Seller financing: A mutually beneficial agreement between the buyer and seller with no third party required
  • Fix and flip loans: To buy a distressed property, renovate it, and resell it for a profit
  • Home equity loans: Drawing equity from a property you already own

These are just a few of the many real estate financing solutions available to buyers today. If you’re unsure which option is right for you, speak with your bank or a consultant in your area to learn more.

Secure Your Real Estate Financing Today

So, what do you think? Can you use these tips to find the real estate financing solutions you need to succeed?

Bookmark this article and refer back to it as you work towards your investment goals. You may also wish to meet with experienced real estate consultants to better understand your financing options.

Now that you know more about real estate financing, what’s the next step? Our site has more terrific tips and advice for you, so stay right here and keep browsing!

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