Where To Find Financing For Your Next Deal
Financing is the starting point of any real estate transaction. You can have everything else in place but without financing you won’t get very far. Financing can often be one of the biggest hurdles for new investors. Many investors don’t have the proper credit score or necessary down payment amount for traditional lender financing. They feel that their options are limited and avoid the business entirely. The reality is that there are many sources of financing than you may realize. Hard & private money lenders have exploded in popularity and demand over the last few years. There are more places to find untraditional financing than ever before. All you need to do is reach out to these people and make it happen. Here are five ways to find financing for your next deal.
- Local Contacts. With any referral it is always a good idea to start with the people you know. Finding financing is no different. Reach out to your real estate agent, mortgage broker, attorney, accountant or wholesaler and ask them if they have a hard money referral. In most cases you can get a handful of contacts simply from the people you know. Even if they don’t have someone they have directly worked with they may have a business card or a phone of someone they can refer. It is always a good idea to keep your financing search localized. There are several national companies out there but they may not provide the personal service and attention you are looking for. The odds are that in your market you can find at least three established hard money lenders who have been around for some time.
- Real Estate Investing Clubs And Networking Groups. If your local contacts don’t yield the amount of lenders you are looking for you can always perform your own search. Real estate investment clubs are a great way to build your networking base. At almost every meeting you can find a handful of wholesalers, attorneys, mortgage brokers and hard money lenders. Prior to the meeting you should have an idea of where you want to invest, the type of properties you are interested in and how you plan on acquiring leads. When you meet a new lender this information can be the groundwork of your relationship. Most investment clubs are held monthly with some possibly even quarterly. To supplement the gap between meetings you can attend local networking groups. These meetings are typically held monthly. They may not have the same number of people as a real estate investment group but the contacts can be just as valuable. In fact with a smaller setting you may have more individual time to pitch yourself and your business. Meetings are a great way to meet hard money lenders if you keep a positive attitude and an open mind.
- Bandit Signs/Closed Deals. Every bandit sign you see can be an opportunity to find a lender. An investor that posts a “we buy houses” sign is looking for sellers but can also be a great way to find a business partner. Reach out to these people and explain that you are a local investor who is looking for financing. Most investors will be open to discussing your vision for the business and want to meet with you. Another way to find financing is through closed transactions. Ask your real estate agent for a list of all deals that have closed with cash in the last six months. If they have paid cash for a property in the past it is a good indicator that they either have cash to lend or have access to capital. The more people that you reach out to the greater chance that you will not only find financing but find someone that wants to work with you down the road.
- Friends And Family. Hard money lenders are not the only way to finance a deal. You can also find capital through the people around you. Without even realizing it you may have several friends, family or co-workers who are interested in real estate investing but aren’t exactly sure what steps to take. Try sending an email to everyone you can think of. Let them know that you are a real estate investor who is looking for financial backing either on a short or long term basis. If they have any interest in discussing more options to reach out to you to set up a meeting. A simple email like that will yield several responses. Some of the responses won’t get too far but all it takes is one person looking for a higher return than the 1% they are currently receiving from their savings account.
- Social Media. Finding financing doesn’t have to be contained to the people on your email list. If you are really interested in getting capital you should utilize social media. Some people aren’t comfortable with letting the world know they are in real estate and looking for financing. However if you can get past this hurdle you can most likely find financing online fairly easily. Social media has a tremendous reach and can help you connect with the right people. These people can be close friends of yours who never knew you were in real estate or friends or friends who want to make a connection. A few consistent posts can put you in contact with the right financial people.
The most important part of finding financing is taking action. There is money in almost every market if you are willing to go out there and find it.