If you’ve decided to take a shot at real estate investment, you’ll need some capital to get started. In general, it’s best to start small whether you opt for residential or commercial properties. Regardless, you’ll still have to invest a substantial amount of money as a down payment, so it’s not uncommon to need tens of thousands of dollars to kickstart your career.
If you don’t have a nest egg to fund your real estate investment, it may be necessary to raise the capital for your project. By understanding how hard money lenders work and what they’re looking for, you can build a strong case for a real estate investment opportunity.
The Need for Investment Capital
Regardless of whether you’re considering a commercial property or a fixer-upper residential space, most investment properties require at least 20% as down payment. You may even be required to pay the full amount at the date of acquisition at the time, but that’s usually more common with auctions.
Along with the list price, investors must also take into account closing costs, including inspection costs, title fees, and appraisals, among others. When you need to figure out how much investment capital to raise, you will subtract the money you will use personally from the total costs.
Raising Money as a New Investor
Raising money as a new investor can be challenging—especially if you’re planning to get financing from conventional sources, such as banks. Most banks require sound financial experience and a strong credit score from applicants. With private money lenders, you have more flexibility to get the funding you need, even with a low score.
Either way, the key is to know what money lenders look for in a solid investment and how you can deliver that. This will help improve your chances of approval when you do reach out to a hard money lender.
Using Part of Own Funds
Although this may not be a feasible option for all new investors, it can be a plus to have some stake in the game. It can motivate you to think through your decisions and be a bit more careful with how the funds are spent.
Additionally, when investors know that you’re using some of your own money in the project, they are more likely to work with you. It shows that you’re confident enough in the plan to put your own cash on the line.
Get hard money real estate loans for your first property investment project. We offer a variety of real estate financing solutions at Insula Capital Group, including hard money construction loans, fix and flip funding, and refinance hard money loans.
We’re dedicated to helping business owners and real estate investors get access to low-cost capital at competitive rates nationwide. Enjoy seamless loan approvals with minimal documentation and no prepaid penalties. Reach out to us today with information about your hard money loans, and we’d be happy to help.