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Real Estate Investing: 5 Ways To Finance Your Real Estate Business

By RealtyBiz News | February 23, 2023

There is no denying that the real estate industry has been growing exponentially for the past few decades. More and more people now understand the benefits of investing in real estate to boost their finances. Home appreciation, cash flows, tax benefits, and lasting results are all major benefits of investing in real estate. 

However, as attractive as real estate investing may appear, securing financing to get started can be a real challenge. You must browse several lending options to find the right match for your ambitious commercial real estate business. This article outlines the major financing options you can consider when investing in real estate. 

Bank Loans:

Bank loans are one of the most popular financing options for budding real estate investors. Not only are bank loans relatively easier to take on, but most people are also already familiar with the process, making them an ideal option. But that is not it. Loans can also offer customers excellent value for money. 

When you buy a property on loan, your value of EMI continues to decrease while the value of your assets increases. In addition, buyers can get hold of amazing properties at low down payments and flexible repayment durations. However, newcomers in real estate and those with poor credit histories may struggle to secure a traditional bank loan. 

Credit Unions:

If a traditional bank loan is not cutting out for you, it's time you consider credit unions. With competitive interest rates and no shareholders, credit unions primarily work on a membership basis. Additionally, since credit unions are more localized in operation, they tend to offer better lending services. 

As opposed to traditional banks, new investors or those dealing with turbulent real estate markets can also find excellent financing opportunities. Plus, they also offer pre-payment flexibility, allowing investors to take bigger risks.  

Private Lenders:

Hard money lending is a common financing tactic in the real estate industry. Instead of seeking loans from traditional banks, here you can approach private lenders to fund your project. Private lending is ideal for property owners who do not have a good credit history to get a bank loan. 

Since there are no set guidelines or corporate procedures in place, borrowers can benefit from flexible qualifying requirements. Not to mention, most private lenders would be far more willing to invest in risky ventures than traditional banks. However, these come with high-interest rates, down payments, and personal collaterals. 

Micro and SBA Loans:

A microloan could be your key to success if you are a newcomer to the real estate market. Designed to provide capital to newer businesses and startups, microloans typically come with lenient qualifying terms and credit score requirements. Alternatively, you can also consider getting your hands on an SBA loan. 

Small Business Associations Loans offer higher borrowing limits and provide longer terms. Other benefits include lower down payments, the ability to maintain stable cash flow, and protection against balloon payments. 

However, keep in mind that while you can use SBA loans to start a real estate business, you cannot use them for property investments. You’d also need a high credit score and significant profit on tax returns to qualify for SBA loans.

Final Thoughts:

Now that you know all the financing options available, it's time to start properly planning. Remember, irrespective of what financing you go ahead with, you would need a solid plan to be successful. If you do not wish to do it the hard way, real estate crowdfunding is a risky yet popular option available to new real estate enthusiasts.

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