Did you know that more Americans are renting than at any point in the last 50 years?
This certainly means the real estate industry is booming. Rental properties are raking in the profits for their owners. Even the commercial sector, which includes office complexes, warehouses, and shopping malls, is also on steady growth after the Financial Crisis of 2008.
So if you’re interested in becoming a real estate investor, the market is waiting for you. However, investing in real estate requires deep pockets. The question is: where do you get this money?
Continue reading to learn how to raise capital for real estate.
Self-Funding (Bootstrapping)
The vast majority of aspiring real estate investors often look at external sources of funding, but you don’t have to go that route. Depending on your financial situation, you can self-fund your realty investments.
Got a tidy sum in a savings account? How is your Individual Retirement Account looking? What about your 401(k) plan?
If you have money in any of these accounts, don’t be afraid to withdraw and use it to fund your real estate investment projects. Of course, there’s an element of risk when you use, say, your retirement funds to invest, but risk-taking is what investment is about!
Property Loans
Debt financing is by far the most popular way to raise funds for real estate investing.
You can approach your bank and ask it to finance a property you’re looking to purchase. If you have a good individual credit score and have sufficient money to put down a deposit, your bank can approve you for a home loan or even a commercial mortgage.
If your bank turns you down, don’t lose hope. There are several other private lenders offering residential and commercial loans. All you have to do research and find a reliable lender who suits your financing needs.
Another lending option is to turn to credit unions. If you already have an active membership with a credit union, chances are high you can secure a loan to finance your investment dreams. But if you don’t, you’ll have to start by signing up as a member and building a financial history with the credit union.
Crowdfunding
In real estate investing, crowdfunding doesn’t mean running a campaign on platforms such as Kickstarter and Indiegogo. It means pooling funds with like-minded individuals and using the raised capital to make joint real estate investments.
For example, if you need $500,000 to make a real estate investment but you have $100,000, you can ask four friends or family members to join you as partners, as long as they’re coming in with capital. After making the investment, you’ll share the profits according to the contribution ratio.
How to Raise Capital for Real Estate Investing Simplified
Investing in real estate is one of the safest ways to earn an income and grow wealth. However, you need a significantly high amount of money to get started. But with this guide on how to raise capital for real estate investing, you now know how to finance your dream.
Good luck and keep reading our blog for more real estate insights. We offer plenty of articles and advice on real estate investing, property management, home improvement, and construction.
