The only piece of the puzzle that remains difficult for many real estate investors and home buyers to find appears to be financing. Debates continue to rage in the media over whether access to credit is becoming more easily accessible or more elusive. However, for now, the following financing options continue to offer much needed leverage:
1. Hard Money Lenders
Hard money lenders have served as one of the main sources of financing for real estate investors for many years. While they may have tightened up significantly during the downturn, hard money lenders appear to be loosening up and once again returning to more common sense equity based lending practices. This may not be cheap money, but for fast short term funds, this can be a great option.
2. Transactional Lenders
Transactional lenders have become main stream in the wake of the foreclosure crisis. Offering up to 100% financing and normally with little to no qualifications, this can be some of the fastest and easiest cash to use for rapid house flips and wholesaling properties. Of course, the catch here is that you’ll need to already have your end buyer in place.
3. USDA Home Loans
USDA home loans may not work for acquiring investment properties, but some pretty sizable firms are carving out a niche in the no money down arena for home buyers to turn over properties fast and at a premium. Just get familiar with the zones which qualify for USDA mortgages (and don’t).
4. Veterans Association Loans
VA loans are not for everyone, or every scenario either, but they do offer up to 100% financing for those that are eligible and come with low rates. This can become a great niche for those rehabbing and flipping houses to veterans and their families.
5. Seller Financing
Owner financing has really blossomed in the last couple of years out of necessity and attractiveness of yields for property owners. This form of financing can be beneficial for real estate investors on both sides of transactions, whether they are buying or selling homes. Seller financing comes in many forms today. They include everything from private or seller held mortgages to rent to own, lease options, land contracts and more. On the buy side, it can be ideal for shaving costs and speeding up acquisitions without having to qualify at the bank. On the sell side, it can help investors move inventory fast and for top dollar. In some cases, this may be used in conjunction with other options listed here where mortgages are assumable too.
6. Private Equity Money
A few months ago, giant private equity firm Cerberus announced backing out of its furious campaign of buying and converting REOs to rentals and instead using their billions to finance smaller investors instead. This money is now trickling down in the form of $1M – $5M loans from lenders like New York based First Key. This money is pegged for real estate investors seeking to acquire or even cash out portfolios of single family homes.
7. Crowdfunding
Crowdfunding is rocketing in popularity with a buffet of new fundraising platforms popping up online. These can be used by real estate investors to raise money to fund all types of deals from land acquisitions to luxury flips and building new developments. Choose the one which works best for you and your strategy and you may be surprised at how easy it is to find the funds you need with a little online promotion.
