Real estate can be a great investment, whether you purchase it for personal use or as a way to generate income. There are also many different ways to finance that real estate. The key is finding the method that is right for you.

Below are some, but not all, of the most common ways that you finance a real estate purchase. Though it does not cover every possibility, this list provides a jumping off point as you consider your options for acquiring real property:

Private Money

Cash is still one of the best ways to purchase real estate. Around 36% of people who are investing in real estate pay cash. There are certain benefits to going this route. Often investors can get the property at a lower price, and cash almost always guarantees a much quicker close. This can help drive up the profitability.

When you use cash to make a real estate investment, you may rely on partnerships. While a partnership with a friend or family member may not always be a great idea, finding an investment partner can be a smart move. The terms of this arrangement can be structured to address the needs of the parties involved. A partner can pay a portion of the purchase price, or they can pay the entire amount, depending on the agreement. Then, the partners usually split the profits based on the contributions they make or made in the acquisition.

Going Through a Lender

Cash is still one of the best ways to purchase real estate. Around 36% of people who are investing in real estate pay cash. There are certain benefits to going this route. Often investors can get the property at a lower price, and cash almost always guarantees a much quicker close. This can help drive up the profitability.

When you use cash to make a real estate investment, you may rely on partnerships. While a partnership with a friend or family member may not always be a great idea, finding an investment partner can be a smart move. The terms of this arrangement can be structured to address the needs of the parties involved. A partner can pay a portion of the purchase price, or they can pay the entire amount, depending on the agreement. Then, the partners usually split the profits based on the contributions they make or made in the acquisition.

When a person wants to get a loan to finance their real estate investment, they usually look at traditional lenders first. These loans can have low interest rates, but that usually depends on the borrower’s credit score. The down payment that is required when you go through a traditional lender is around 20% on the average. This is great for purchasing real estate property or for a real estate refinance.

There are a number of government programs for buying real estate, including Fannie Mae and the Federal Housing Administration (FHA). Many of these programs require the buyer to live in the home, and there are eligibility requirements including credit history. First-time buyers and those with a lower credit score may find it easier to qualify for certain government loan programs, but overall, these types of loans are not considered to be ideal. Many experts recommend seeking funding from other sources first and using these programs as a last resort if nothing else works out.

Other Ways to Finance Real Estate

A portfolio lender is similar to a traditional lender, but they focus more on specialized loans that have different credit requirements and other terms. Many of these loans are kept in house, so they have control over the terms and what is needed to qualify. This can be very appealing to borrowers who may not meet the lending guidelines of other loan programs. This is a good option for those investing in commercial properties such as hospitality or multi-family apartments.

Many people choose to use their retirement savings to invest in real property, but this should be considered on a case-by-case basis. It definitely is not for everyone. The self-directed solo 401(k) is a popular option, as it holds investments that can be utilized for certain ventures.

A contract for deed is another common choice for land investment ventures and is similar to a lease purchase option, but the terms are slightly different. There may or may not be a down payment. Also, if the buyer does not uphold their end of the deal, the seller can reclaim the property. However, in many states, if the seller reclaims the property, he or she must pay the ousted purchaser for any improvements they made to the property while it was in their possession.

No matter what kind of loan you are working to achieve, finding the right partner or lender is key to your success. At Magilla Loans, we believe that connecting with the right lending source should not mean exposing your personal information to an endless parade of strangers. If you’re looking for a better way to find lenders to finance your real estate investments, try our loan search engine today. We match you up with lenders that closely fit your needs, and then you choose who to share your information with. It’s that simple.