Interest in real estate investing has been growing steadily over the past five years or so. It is in part due to the reality TV shows about flipping houses, but there are other reasons. The stock market is pretty volatile, so many investors are looking for lower risk.
There are a number of different ways to invest in real estate, and some are relatively low risk and provide returns far better than savings accounts and often better than most stock market investors enjoy. Wholesalers flip properties without rehab or renovation, usually flipping in one to three weeks. Fix & flip investors do work on the home, from minor repairs to extensive rehab that can take months. Rental property investors try to buy ready-to-rent homes for rental income and appreciation.
Rental property buyers get long-term mortgages and need to have down payments. This article is about where the other investor types, wholesalers, and fix & flip investors, can find money to fund their deals.
Move Personal Savings – Of course, reallocation of some money that’s sitting in savings earning very low-interest rates is a way to fund your own investing. Stay diversified though and only allocate a portion of cash to real estate.
Borrow from Retirement Account – Some retirement accounts, notably 401k accounts, allow borrowing against the account. The money must be repaid within the rules, but it can be a great resource for funding deals.
Self-directed IRA – Moving an IRA to a self-directed account allows you to make your own investment decisions, and you can invest in real estate. The rules are strict, but it can be a great way to accumulate investment profits to grow tax-free. Rental property investors can use this method to buy and manage rental homes in a self-directed account.
HELOC Funding – A Home Equity Line of Credit is a great tool for short-term real estate investing. You apply for the loan but do not have to use it until you need money. You’re pre-approved for an amount you can borrow, and when you have a real estate deal, you can simply write a check and pay back the HELOC out of your deal profits.
Hard Money/Private Money – This is borrowing from private lenders, many of whom specialize in lending short-term funds to real estate investors. Also known as transactional lending, the real estate investor can have the purchase of the home funded with hard money, and when the second closing selling to the buyer is done, the transaction lender is paid back. Fees are high for this type of loan, but knowing them up front, you factor them into your deal.
There is no shortage of money out there for the active real estate investor. You just need to learn the ropes and craft good deals with adequate profit for the risk involved.