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Finding money for real estate investments shouldn't be your biggest problem. If you find a great property there are always investors who will want a part of the deal. As you may recall from Lesson Seven, you can always flip the contract to another investor for quick cash with almost no cash requirement on your part. Do that a few times and you can build some capital.
As for financing, there is always a way. For example, my wife and I were traveling through Farmington, New Mexico on an extended vacation, and found a fixer upper we liked. We offered the owner $40,000, - $20,000 cash (what we had at the moment) and a promissory note for the other $20,000, to be paid, with interest, in a year. That meant we wouldn't have had to go to a bank, because the repairs could be done with credit card advances. (The owner agreed, but we backed out of the deal for other reasons.)
Here are some of the other ways to raise capital and financing. This isn't an exhaustive list, but there are enough ideas here to get you thinking.
1. Non conforming loans. No-doc and low-doc loans, meaning no (or low) documentation of your income or credit required, are still available in many areas, or even online. You'll often only be able to borrow up to 70% or 80% of the purchase price or the property value. But if you have 10% in cash, you might be able to borrow the other 10% or 20% from a friend or other investor.
2. Hard money. "Hard money" lenders specialize in short-term loans with high interest and high fees. This is common financing for a fix-and-flip project. If you get the money fast, and make $30,000 on a project, does it really matter if you paid $10,000 interest in six months?
3. Sellers. Seller can help even if they need most of their money out of a property. For example, a bank might loan 90%, and allow a seller to take back a second mortgage from you for 5%. That leaves you needing only 5% for a down payment, allowing you to conserve your cash for repair costs.
4. Contract for sale. Also called a "land contract" or other names, this just means the seller lets you make payments, and delivers the title when the note is paid in full. I have sold real estate this way for as little as $250 down, to get a higher price and interest. In the case of a fixer upper, you might make the whole balance due in a year. This might motivate a reluctant seller.
5. Finding money in your credit cards. Suppose a seller is willing to take $10,000 down on a fixer-upper that you expect to make $25,000 on. Why not use credit card advances? That makes it a true zero-down deal for you, and if you flip the house in a few months, you might have paid less than a $1,000 in interest on the cards. Don't let $1,000 worth of "high interest" get in the way of making $25,000.
6. Retirement accounts. Tax laws get complex in this area. Check with a tax attorney to see how you might borrow from your own retirement account to finance your flippers.
7. Family and friends. If you use this source, try to make it all business. They help you and you help them. After all, loaning you money at 7% isn't a gift if their money is getting 2% in their savings account.
8. Partners. You can arrange for investors to each put money into a partnership, paying your share not with cash, but by managing a project. Or you can just get a partner to split the cost with you.
9. Start saving. Someone is living on less money than you. Live like them and bank the extra income you have for a while. It may not sound fun, but it is a way to get serious about investing.
10. Other property. Sometimes finding money for a deal can be as simple as opening you mail and accepting one of the offers for a home equity loan.
Look, and you'll find the money you need.
Steve
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Real Estate Investing Course.