Real Estate Financing

A HELOC is a combination of a line of credit for an investment property and a home equity loan. This line of credit can equal the approved amount over a period of time and can be used for whatever you choose. Most HELOCs have adjustable interest rates.

While HELOCs offer flexibility, there are drawbacks. For instance, you are putting up an existing property, maybe even your actual home, as collateral. This is a business with few guarantees, so that can be stressful. The downside is that payments can impact your savings or spending plans.

Crowdfunding is a fairly new option within real estate investing. There are a lot of ways to obtain crowdfunding, the most efficient one may be through an online platform. Essentially, you bring together a group of private investors, each of whom pays into a pool that you use to finance your project. Ultimately, each one gets a proportionate share of your profit. Be sure and check this out with your legal or financial advisor before moving forward with this option.

Borrowing money from family, friends and other associates is considered private lending. However, the decision to mix family and business can put a strain on personal relationships. While these are personal decisions, it’s highly recommended to draft a memo of understanding to help ensure the lending agreement is clear and there are no misunderstandings.

Hard money lenders function differently than traditional banks. They understand the real estate investment business. They know that you might be cash-poor or credit-thin and this is core to their business model. Hard money loans do contain a set of rules regarding the rate, duration and how much you can borrow at one time.

While each situation is unique, here are some of the things they may ask:

• How much cash can you put down? Some hard money loans require you to contribute a down payment while others fund your entire deal.
• How’s your credit history? Some lenders don’t require credit, but of course, the rates tend to be higher.
• What’s your job history? Have you been successful? Have you been in the business for a while?
• What does the deal look like? Some lenders really take into account the details and evaluate the deal’s potential.

There are a variety of hard money lenders. The challenge is finding the one who will give you the best rate and most favorable terms.

A self-directed IRA is a common tool that people use to manage a variety of investments. When you have a self-directed IRA, you are permitted to take out money to use for a few specific investments, including precious metals, extractive goods and real estate.

When considering leveraging a self-directed IRA for a real estate investment, it’s important to understand the way it may impact your taxes; there can be tax benefits or complications. Another thing to consider is that you are taking money out of your retirement plan, which is not typically advisable.