Big opportunity now, but there's a challenge in the real estate investment industry. There are many opportunities for real estate investors to buy inexpensive properties and fix them up and exit profitably... but they need something vital to make it happen. They need cash.
Real estate investing is a capital-intensive business because it requires tens of thousands of dollars up front in order to get started. You need to put some money down on the property, you need to fund repairs, you have carrying costs. Once you've covered all of those, you can sell the property (or rent it) and make a lot of money but it needs to have the cash up-front first.
Many brand new real estate investors make the mistake of using their own money to fund the deal. They use credit cards and they borrow against their mortgage. Unfortunately, those tactics have limitations:
* Credit cards have high interest rates and if a deal goes bad (and sometimes they do), the real estate investor may have a high amount of money to pay down on his or her credit card with exorbitant interest to pay, too. This can damage credit ratings!
* Borrowing against the mortgage is another way that real estate investors pay for their deals. Although the interest rate is lower, there is still substantial personal risk should the deal ever go south. The borrower could end up with their home repossessed.
High interest rates, credit worries and even the threat of eviction are all challenging problems that face the real estate investor using their own money.
But there are other options. Real estate investors need to apply the principle of "OPM" - "other peoples' money" - in order to invest successfully. When they do that, they put other people's money to work for them and they can get better rates of interest and they reduce their personal risk.
There are several ways to get access to other people's money:
1. The real estate investor can contact his or her family or friends and ask them to invest. Sometimes this is a good idea, especially if the real estate investor has a successful track record and the know people with money. However, this can be risky because they could lose their friends or family should a deal ever bust.
2. The real estate investor can go to a lender - like a lending institution. A lending institution might lend them money or they might not, depending on the investor's credit rating and how much risk the lending institution is willing to take on.
3. The real estate investor can find a group of investors - both individuals and corporations - who are willing to invest. This takes more leg work on the investor's part but it can release a great deal of money to the real estate investor to invest. And there are many investors out there!
For more information go to www.realestateinvestingnewsletter.com
for your free newsletter subscription!
Real estate investing is a capital-intensive business because it requires tens of thousands of dollars up front in order to get started. You need to put some money down on the property, you need to fund repairs, you have carrying costs. Once you've covered all of those, you can sell the property (or rent it) and make a lot of money but it needs to have the cash up-front first.
Many brand new real estate investors make the mistake of using their own money to fund the deal. They use credit cards and they borrow against their mortgage. Unfortunately, those tactics have limitations:
* Credit cards have high interest rates and if a deal goes bad (and sometimes they do), the real estate investor may have a high amount of money to pay down on his or her credit card with exorbitant interest to pay, too. This can damage credit ratings!
* Borrowing against the mortgage is another way that real estate investors pay for their deals. Although the interest rate is lower, there is still substantial personal risk should the deal ever go south. The borrower could end up with their home repossessed.
High interest rates, credit worries and even the threat of eviction are all challenging problems that face the real estate investor using their own money.
But there are other options. Real estate investors need to apply the principle of "OPM" - "other peoples' money" - in order to invest successfully. When they do that, they put other people's money to work for them and they can get better rates of interest and they reduce their personal risk.
There are several ways to get access to other people's money:
1. The real estate investor can contact his or her family or friends and ask them to invest. Sometimes this is a good idea, especially if the real estate investor has a successful track record and the know people with money. However, this can be risky because they could lose their friends or family should a deal ever bust.
2. The real estate investor can go to a lender - like a lending institution. A lending institution might lend them money or they might not, depending on the investor's credit rating and how much risk the lending institution is willing to take on.
3. The real estate investor can find a group of investors - both individuals and corporations - who are willing to invest. This takes more leg work on the investor's part but it can release a great deal of money to the real estate investor to invest. And there are many investors out there!
For more information go to www.realestateinvestingnewsletter.com
for your free newsletter subscription!
About the Author:
Looking to find the best deal on real estate todayreal estate, then visit www.realestateinvestingnewsletter.com to find the best advice on investing in real estatereal estate training for you.
No comments:
Post a Comment