Investing in CA real estate takes capital.
Often, first time investors use their own money to invest first. This usually works to buy a couple of properties free-and-clear but soon, most people run out of their own capital… which means they either have to stop buying real estate or they have to figure out how to buy more real estate without using their own money.
In this blog post, we’ll share a number of ways that you can finance your next investment property.
How to get investment property financing in California CA…
There are several ways to get money to buy an investment property in California. Here are some of your options:
1. Traditional Banks and Lending Institutions
One way to finance your next investment is to borrow money through a bank or lending institution. If you have good credit, and enough money for a down payment, then this can be an effective way to acquire more properties — potentially several more properties!
You’ll need to make sure that your credit score is in good shape, so be sure to pay your debts on time, and pay them off in full regularly to demonstrate a history of good credit management. Once you build up good credit, financial institutions will be willing to lend to you and you can go out and acquire properties.
At some point, however, your debt-to-income ratio might exceed a bank’s desire to lend to you, once you have a certain number of properties under ownership. When this happens, then it’s time to turn to other sources to finance your real estate investments.
One very clever way of financing your real estate investing is to borrow against your existing investments and use that money to buy new investments.
For example, if you own a couple of properties and they have some equity in them, why not borrow against them (by refinancing them or by taking out a home equity line of credit) and using that money to acquire more properties. This is the power of leverage at work in your investments!
Of course you’ll want to be careful that your debt servicing payments are not more than the income you earn from your new acquisitions but there are investors who build up a large portfolio just with their own credit and this self-financing strategy!
3. Private Lending
Another way to finance your real estate investment in California is to use a private lender.
Private lending is when another investor lends you their money. You pay them back, just like you would pay back a bank; the only difference is: private lenders don’t always look at your credit score; they’re often more interested in the investment itself and they’ll decide how much to lend you and what interest rate to charge based on their assessment of the property.
This is a very powerful kind of financing because it’s win/win: You win by getting the money you need to do deals; the private lender wins because they want to invest in real estate and have the money to do so but don’t have the time or desire to do the work themselves.
If you are a private lender who wants to invest in real estate without the effort of doing the work yourself, be sure to connect with us at (805) 852-7418 — we can hook you up with some investors who are looking for money for their deals!
4. Seller Financing
Another great way to finance real estate investments is to use seller financing. It has become a bit more difficult with new federal regulations… but it can be done.
Seller financing is where you work with the seller themselves who will sell the property to you… but instead of getting a lump sum for the property, they simply take ongoing payments until it’s all paid off.
“Newbie investors” are sometimes surprised that this method even exists but sellers like it because they get the cash flow without the headache of property ownership (plus their risk is minimized because if you fail to pay, the title of the property reverts back to them). This is another win/win deals.
How will you finance your next California real estate investment?
With so many options to choose from, how will you finance your next real estate investment? Choose from these four powerful financing strategies and mix-and-match them for the best result for you!
If you’re eager to invest and just need deals or money to help you get going, just click the link below and fill out the short form to get started. We’d love to help you build your investment portfolio!