There is one thing that often keeps people from investing in real estate more than anything else. It is the question they have in their mind about how to finance the property once they find a good deal. The majority of people say, “I have no money and bad credit. How am I going to finance the property?” This all is not more than a Money Myth.
Since they do not know how to finance a deal if they were to find one, their forward movement stops, and they think that investing in real estate is impossible. The truth is that everyone has to overcome this problem in order to successfully invest in real estate. The simple fact is that if you do not know how to make money without money, you will also never be able to make money with money. The Money myth is always occurred while investing in real estate. Let’s destroy this money myth and get you moving forward on your real estate investing journey.
First of all, you should now realize the basic truth – the requirement of having money and credit is just a myth because people without their money or good credit invest in real estate every day. They simply learn other ways of doing deals until they have their own money and credit. Even once people do have their own money and credit, they often prefer to do deals where as little of their own money as possible is at risk.
Here are some ways that you can finance your real estate investment deals without money or credit:
One option is to get a loan from the bank on the property. Sure, the bank will require credit and a down payment. While this is not the most creative solution, it is still a solution. Instead of you needing to have 100% of the money to buy the property, the bank is saying that they are willing to finance a portion of the purchase price. Often, banks will require 20% down on an investment property. Too many new investors look at the 20% and all they see is an obstacle. We want you to look at it differently. If the bank is willing to finance 80% of the purchase price, you now have 80% of your problem solved. Now you just need to solve the last 20% to complete the deal.
Hard Money Loan
Another option is a hard money loan, sometimes referred to as an asset-based loan. As the name suggests, the loan is based on the value of the asset (the property) rather than your personal financial status. Many of these lenders will also include repair costs as part of the financing as long as the deal meets their guidelines. Each asset-based lender does things differently, so shop around.
You could also bring in a partner that does have the money and credit. Purchasing a property does require money and/or credit, but it doesn’t have to be YOUR own money and credit. You can bring the opportunity to someone that does have the money and credit and split the profits. This is a common way for people to get started as an investor.
You could also wholesale the property to another investor. In a wholesale transaction, you are selling your rights to the deal (specifically, you are selling your rights in the purchase contract) to another investor who wants to buy the property. You normally take a fee for structuring the whole transaction, but since you are not the one buying the property, it does not require money or credit.
These are just a few ideas to show you that the notion that you must have your own money and credit to invest is just a myth.
- Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.