Financing is the main pillar of any real estate transaction and how to get real estate money. If you want to go about arranging financing for a lucrative deal, you must be conversant with various types of financing. How does it work? And how can you arrange one for yourself with the minimum hassle and in the shortest period of time. Let us first analyze how many modes of financing are available to an aspiring real estate investor.
Commercial Banks and Investment Banks:
These are the most notable financers of real estate deal. In fact they are so common that a layman thinks that they are the only ones who can provide financing. It’s not true and we will see below that there are other options available if you do not want to deal with a commercial or investment bank. Banks have a huge appetite so they can give you big amounts payable within a longer period of time. Seems good. But they have a very professional and strict system of evaluating a potential customer. They also have an in-house team of valuers and field agents. If you manage to pass through them, you can get stuck in the labyrinthine system of approvals which takes quite some time. If you have a deal that needs urgent financing, you should avoid a bank because they can take a lot of time to disburse your required money.
Unlike you and me, there are still people in America who have got a large amount of cash. Since banks have become risky, they have no choice but to invest their money in other areas where it can make bigger profits. If you can find such people and convince them to lend you money, you can save a lot of time. Usually these people agree to lend the amount since a real estate deal is secure enough and guarantees huge profits. The terms and conditions will also be much easier than a bank’s.
In order to secure such a facility, you must use the equity in the proposed property as a security for the loan. This results in decreased worth of the property since the lenders marks a lien on it. The phenomenon is also, sometimes, referred to as secondary mortgage. Equity loans have a fixed interest rate.
You may not know it but you already posses a short term financing facility. It’s in the form of our credit card. You can use it for making short-term real estate deals like flipping house or short selling. These are a form of unsecured lines and can provide you with urgently needed cash in case you have a seller who needs immediate payment.
There are various other financing facilities available and you can choose anyone of them whichever suits you best. You must decide which one is easier to obtain and use at any given point in time.