So you have decided you want to be a real estate investor. Well, unless you are only going to buy one home at a time and sell them, you are going to need a way to carry the costs of multiple homes while you flip them or hold onto them until the market improves. To do this, you need to be raising private money. By raising private money, you can ensure that you have the funds to carry mortgages so that you donít end up going into foreclosure on multiple properties. In addition, if you are building a property like an apartment building or commercial building, then you need to be raising private money. Raising capital is extremely important when you are a real estate investor, and there are four places where you go to do this.
The first place you should be going is to a mortgage company or a bank. Banks and mortgage companies have a specific group of investors who are meant to provide private money for real estate investors. This is your best option because if you have a good business plan and the investors think you are a good investment, then they will give you all the money you need for the development, as long as you are the owner of the land. It is always better to go with a mortgage company because they will not see you as a risk like the bank will. That being said, with a mortgage company you do pay a higher interest rate because they are taking on more of a risk.
The second place to go to is your friends and family. If you have get four or five family members and friends to join you in the investment, you protect your credit and you get the money you need for the investment. When you sell the property, or when you start making money off the development, then the friends and family who invested with you will start to make money. Of course, you have to make sure that all the paperwork is filled out so everyone knows what they are getting. As well, if the investment fails, you could end up losing some friends who will lose out on their money.
The third place you can look to is a private investor. These investors are not like a mortgage company. They are someone who wants to develop property or flip homes, but does not have the time to do it, only the capital to invest.
The fourth place is to use your own money. When you do this you should start small because you are now taking on the greatest amount of risk. If it fails, you lose all the money. Of course, if it succeeds then you get all the profit from it and you get all the reward from it. Many choose this route because it gives them the most control over the investment, and the most opportunity for profit.