4 Ways to Secure Financing for Your Real Estate Project
Real estate is a very lucrative field. There is great potential for amazing profit margins and incredible real estate deals. However, one of the major problems that many people have who attempt to participate in the real estate arena is securing financing for their real estate projects
Many people cannot utilize personal funds to complete a real estate transaction. The main reason is because they usually do not have enough money to complete the transaction. The average real estate transaction can be cost prohibitive. In addition, many people who may have the money necessary to complete a real estate transaction do not want to use their own money to complete the deal.
Traditional Outside Financing Sources
Most people either prefer or need outside financing to complete real estate transactions. The problem for many people is where and how to find these outside funding sources? Traditional sources such as banks, credit unions, and mortgage companies have become too problematic for numerous people.
Since the housing crisis several years ago, these institutions have made their requirements and guidelines too strict for many people to secure financing through these traditional sources. Typically the current requirements list items such as a certain credit score to qualify, a minimum down payment amount, and complete disclosure of income related information. In addition, the time needed to complete the entire process can take longer than the time provided to complete a real estate deal.
Popular Non-Traditional Financing Sources
For these reasons along with several other reasons, many people have started to look beyond traditional sources regarding financing for real estate deals. Some of the most popular non-traditional financing sources currently available to people interested in securing financing for real estate deals include:
1. Owner Financing — This is financing that is provided by the owner of the real estate property through agreed payment terms.
2. Subject To Financing — This is financing accomplished when the buyer agrees to carry the current financing already provided regarding the real estate property.
3. Seller Second Financing — This is financing accomplished when the seller agrees to carry a note concerning the real estate property for a defined time period. Typically it is for the amount needed for the down payment.
4. Lease Option Financing — This is financing that is provided by the owner to allow the buyer to move into the property and purchase the property at a later date. A portion of the lease payment can be used as a partial monthly payment towards the purchase of the property.
When many people think about securing financing for a real estate project, they usually think about traditional sources for financing such as banks, credit unions, and mortgage companies. However, there are a variety of other ways to secure financing for real estate projects.
Roman Temkin is a real estate developer from NYC.
