Financing real estate investments


However, few people take advantage of this type of investment. It is important to know that everyone can invest in real estate. There are four main ways for most people to obtain the funds to make a purchase.

The second means of obtaining funding is from a bank. Banks, credit unions and mortgage companies lend money for the purchase of investment properties. In this situation one would use personal cash to pay the down payment, which usually accounts for 20 to 30 percent of the purchase price. The borrowed money would then be used to pay the remaining portion of the purchase price. This is called leverage — using other people’s money. There are many advantages to using leverage, but the main point to remember is that an investment is only the amount of the personal cash put into the deal, the down payment and any closing costs.

Fourth and lastly is an IRA (self directed). Few people know that anyone is allowed to direct his or her own IRA retirement account. Many people have considerable amounts of cash in these accounts that could be used to buy any type of investment, such as real estate, gold or art. The IRS has strict guidelines about how this is to be done, so it is best to use a facilitator who is well versed about these rules.

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