A real state investment sounds scary to quite many people. Real state is not only for people with a deep pocket if one knows how to get funds for real state investment. In Ethiopia there are a lot of emerging and vintage real state companies that have been serving the demands over a decade now. In today’s blog, we’re going to share with you ways you can fund and invest your first-ever real state property without having to visit a bank.
Hard Money
A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds from a private individual or a group. Interest rates in hard money loans are typically higher than conventional commercial or residential property loans, but it could be an approach you can take if you don’t want to go your investment to be funded in a short time without going through any corporate procedures.
As much as how easy it can be to find a hard money loan, and have a loose structure to get you a fund quickly, hard money loans also have cons that you may need to consider. The first thing is interest rates are very high. The second thing in hard money loan should be paid back in a short amount of time usually less than a year.
Family or Friends loan
What do Warren Buffett and World Trade Center developer Larry Silverstein have in common? They both became billionaires after financing their first deals through family and friends.
In a real state investment, it can be hard to finance a fund to buy your first real state. You can always reach out to your family or friends to help you in closing on your first real state property. The beauty of this strategy is that it requires no start-up capital, no collateral. you can ask one or more than two of your family members or friends to fund your investment.
Owner Financing
Sometimes referred to as “Creative financing” or ” Seller Financing”. Owner financing is a transaction that eliminates the involvement of banks and can bring an advantage to both buyer and seller. Owner financing is a transaction in which the real state owner finance’s the purchase of his own property directly to person or entity buying it, either in whole or in part.
You can finance investment for your real state house by asking an owner financing, by making a small down payment and aks the owner to finance the rest. But it’s quite important that you know this type of financing is for just a short period of time in many cases until you are able to refinance to pay the owner in full. Owner financing is not an interest-free loan, you would have to pay the owner the owed money plus interest.
Partnership
Real state investment is not cheap, and when the price is too expensive you can always find the right equity partner to help you finance the property that you’re seeking. An equity partner is someone who you bring into a transaction in order to help finance the property.
An equity partnership is a joint financing venture that you and your partner can come together to finance a real state property. Depending on your partner he/she can have an active or passive role.
Additionally, your partner typically receives in accordance with their ownership percentage a return on their investment that includes cash flow, appreciation, depreciation, and eventual profit when the property is sold.
