(STL.News) Real estate is an investment that is very steady. Sure, there are dips and housing bubbles burst, but the general trend over time is that real estate pays off.
The biggest problem with getting started as a real estate investor is cash flow. Well, that is a common problem across a lot of businesses and industries, but when you want to buy houses and flip them, a lack of cash flow can really slow down your growth.
It pays to have some means to get money to be able to invest and grow properly so you can speed up the returns on your investments.
In this article, I will go over several ways you can get funding when you need it to be able to start your growth period of your investing career.
1 – Fundraise
No, I am not talking about hosting a bake sale to raise funds to be able to buy your first house to flip. What I mean is that you can sort of crowdsource to get the initial cash to get started so you don’t have to wait until you’ve saved for a down payment.
Think of it like pooling your money with other investors and then using that money to buy the real estate. Then the people that gave you funds will receive a portion of the profits. Of course it is more complicated than that, but it doesn’t mean that it isn’t easy for you to get started. A popular one is called Fundrise that allows you to use an app to make it even easier to get started.
You’ll need to read the Fundrise review to see if it is going to be a good option for you.
2 – Traditional lending
If you already have a mortgage that you are paying for the house that you live in, it may prove difficult to get a loan for a house that you intend to fix up and flip. Most people that go this route already have a portfolio of houses that they’re successfully flipped but even then many use the cash to buy rather than rely on a bank.
Of course, it is worth it to at least talk to your bank about it. If you are dealing with a community bank that has a vested interest in somebody helping to fix a lagging real estate market in an area then they may be interested.
3 – Hard money loans
If you just need money to complete the renovations, then a hard money loan is a good option. It’s a loan a bank gives to developers and contractors who are fixing homes to sell.
They typically need to be repaid within a year so keep that in mind. They are good for short term projects that need to be finished up before you sell the house. Try to not go for this type of loan if you are desperate, however, you may be tempted to sell the house for less than what you believe it’s worth just to move it quickly to repay the loan.