Why do most people hold back from real estate deals? One of the main reasons is money. Others are time, fear, and experience. However, there are various ways an interested buyer can buy property without necessarily having hard saved up cash. They include:
Other People’s Money
1. Partnerships
Real estate buyers can opt to take on a partner who provides the money needed for the purchase. In return, the buyer has to find and manage a deal to get equity. It is a common way of scaling and growing properties without having to use your money. The partnership has to be structured and approved by all partners involved.
2. Private Money
Buyers can also use private money and pay the financier their money in interest instead of giving them equity. It can be set up in two options:
- Interest-only with a balloon payment
- Interest and principal payments
The lender and buyer have to agree on the interest rate, amortization, and length of the loan. When setting this up, any terms are negotiable provided the numbers work.
3. Seller Financing
This mode of financing allows the owner to hold the mortgage on the property. The buyer then makes payments to the owner instead of a third party. A down payment is usually involved in mitigating risks for the seller holding the mortgage.
Finding Your Own
More independent buyers prefer to carry the burden on their own. They can find their own money through one of the following ways:
1. Equity
This option allows buyers to use their current properties to leverage a home equity loan or line of credit. The majority of banks give 85-95% loan of the primary residence’s value. Sometimes this option does not generate enough down payment for some buyers.
2. Investment Accounts
Buyers with investment accounts can use them to borrow and receive a line of credit. Investment accounts have a minimum limit required to open a line of credit. The account acts as collateral against the debenture. The limit available on the credit line can decrease or increase depending on the difference in your investment account.
Conclusion
The options above provide buyers with ideas on preparing for a real estate deal financially. There are many legal ways to accumulate enough money to purchase the property.