All though there are many other options than these four types of real estate investment financing, if you are able to comprehend and understand these, there’s a good chance you will understand any real estate concepts encompassing any combination of financing options. Let’s take a look at the most common, including Colorado Hard Money Loans.
Equity Investors--Utilizing equity investors for financing of a real estate project means you will form some sort of joint venture or partnership. You will need an LLC or other entity as co-owner with your investor. The investor provides the capital and you do the deals. The drawback is, of course, that you will need to split all profits on each project. The percentages for distribution of the profits will be governed by the deal structure you negotiate at the beginning of the project. On the other hand, if the project loses money, then both you and your investor will feel the impact. If you are successful on your projects, an equity investor is the most expensive form of capital since they take half or more of the profits on the projects. Another option is forming a private investment fund. You sell shares to accredited investors with a fixed rate of return.
Bank Loans—One of the most common types of real estate financing are bank loans. This option is a very affordable one. Due to the federal government, this option also has a lot of restrictions. In the U.S., almost all bank mortgage loans are owner occupied, for single family or apartment buildings with 1 – 4 units. The financing entity is the FHA. For a fix and flip of under-valued properties, it is almost impossible to secure financing. Buy and hold will also have its’ challenges. With FHA bank mortgages, there is a limit on the number of mortgages an individual investor can attain.
Owner Financing—This is an option where the seller will be the bank. You have a down payment and the seller will carry the balance and act as the bank for the remainder of the loan. This is basically an agreement with you (buyer), and the owner of the property(seller). This type of financing can encompass almost anything (legal). If you meet the right owner, you may be able to reach an agreement where the seller forgoes monthly payments for a share of the sale of the property on a fix and flip. The owner financing is only limited by your imagination on how the financing will be structured.
Colorado Hard Money Loans
A Colorado Hard Money Loan is a loan that is issued by non-bank lenders for real estate investment. Single family fix and flip is the most common and popular type of Colorado Hard Money Loan. The target property will increase in value when the investor renovates and refinances or sells the property. Terms on these loans can be 12 months and often carry fees.
One of the most important factors when considering a hard money lender is the cost. If you find yourself bidding for a property against a cash buyer and time is of the essence, then you may want to consider using a hard money lender.
Arizona Hard Money Lenders can close quickly, your personal credit score is not considered, good if you have dings on your credit report, length on employment is not considered, and the loan is focused on the after-renovation value of the property. If you choose this option, spend time researching your options and look for a lender with good past history. And do you due diligence and compare interest rates of costs for originating the loan.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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