Getting started in real estate investing doesn’t require a huge fortune. Truth be told, savvy investors often pick up properties, putting no money down on their own, financing the entire acquisition, while still turning a healthy profit. In fact, the more you leverage or borrow, the higher your return on equity ends up being, making no-to-low money down a favorable strategy for shrewd buyers. Below are a few real estate funding options you could use to fund your first acquisition.
An FHA Loan
If you’re making your first investment, a great way to go is to get a mortgage insured by the Federal Housing Administration. With a down payment of just 3.5%, you can pick up a multifamily property, live in one of the units and rent out the other units.
Hard Money Loans
Even with record-low interest rates, traditional mortgages easily take around 60 days to close, which is a long time when you’re making a deal and looking for real estate funding options. Hard money loans — despite their higher interest rates — give you the flexibility to strike quickly if you have a great deal on your hands.
Trust Deed Investing
With this real estate funding option you’re essentially taking a mortgage from one, or more, private lenders who would function as a bank, giving them a deed of trust as collateral on the property.
Hybrid Financing: Debt Mixed With Equity
If you have a really good deal, finding the funds is the least of your worries. Say you’ve gotten 75% of the LTV, you need to come up with the remaining 25%, assuming you don’t have the cash in hand. To fill this gap you can take out a hybrid loan, mixing the traditional payment schedule of a mortgage with a piece of ownership or equity for the lender.