Capital Financing in Real Estate Investing

Capital Financing in Real Estate Investing 5.00/5 (100.00%) 4 votes

Money Is a Key Commodity
real estate investingWhen you first decide to go into real estate investing, one of the very first things you should be thinking about is where you are going to get the money to develop your assets and who will sponsor you to begin with. If you are a well established business person then this is not so much of a problem because the real estate will fall within your normal portfolio that you can develop as part of your strategic plan.

However for the majority of people they will have to look to a number of sources for potential funding and work out the best alternatives before they can even begin building their idea. This article aims to highlight some of the things you may do in order to raise that initial money that will kick start your ambitions.

The Sources of Funding
1. The Bank
investment proposalIt is possible to borrow from the bank or other financial institutions as long as they are convinced that you will be able to pay back because your business proposition is a viable business. The banks will offer a variety of lending programs which can be specifically designed to suit people who have gone into real estate investing. You will need to carefully assess each alternative before choosing the ones that are best for you.

The financial adviser will go through the products with you at the consultative meeting but again you will also have the opportunity to look up the schemes yourself and compare their operations. Remember that the bank is more amenable to your proposal if you can show that you yourself have invested a significant portion of your money into the real estate venture. This would indicate to them that you are part of the risk and can be trusted to give them back their money when the time comes.

Borrowing does not just have to be about banks, you can even turn to your friends and relatives who might able to contribute to your real estate investment venture.

2.You may want to use your own resources such as savings or investments.
This is a relatively easy method because you are the only one involved and you are in effect only answerable to yourself. There are no lenders breathing down your neck and you do not have to waste money paying interest. Although this may appear to be a relatively easy way of getting that initial cash, the reality is that not many people have the amount of resources that are required to create a good real estate investing portfolio. They might even be able to raise a significant part of the required fees but they will also need help from outside sources.

The fact that you are assuming all the risks with no external support means that you could end up facing crippling losses on your own without any sort of external support network. That is why even if the person has the cash available; they might become reluctant to use their own cash to finance the whole investment. Nevertheless it is an option to consider.