Investing in Real Estate is a rewarding and profitable endeavor with many different motivating factors. Many times the catalyst is a product of a significant life change. The care of an elderly family member or job promotion- therefore requiring a relocation for example. Raising capital to invest in real estate may be a good financial move in this type of situation.
Beyond a significant life change, Real Estate is often used to balance other investments, for example, stocks and bonds. The recent volatility of the stock and bond market has led to many investors moving a portion of their assets or adding Real Estate to their strategy.
Whatever the factors are of becoming invested in hard assets like rental properties, Real Estate is one of the best ways to create wealth. Raising capital to address these opportunities has many pathways other than going to the bank.
Other Peoples Money (OPM) has been the starting point of most every venture into raising capital for all types of business, including Real Estate. OPM are private lenders who are not affiliated with any bank. Many times they are referred to as ‘Money Partners.’
Private lenders can be friends and family and are many times the first and easiest connections to raise capital. Beyond family and friends, there are those with capital looking for an excellent opportunity. Private lenders are similar to traditional lending. They too are looking for a good return for their investment. There are similarities and differences and pros and cons for each.
Pros and Cons
Private lenders operate much faster, usually with less paperwork than a traditional lender. However, time may be an essential aspect of closing a deal, while waiting for approval from a bank may hinder the process. On the flip side, obtaining a loan from a traditional lender like a bank will give the owner autonomy to operate. Regardless of the chosen method, a good understanding of the return on the investment (ROI) is a necessary step to raising capital.
Having realistic expectations and a detailed plan of how the secured funds will be paid back is the first step to raising capital. Remember, the fear of loss is a more significant motivator than the potential for gain. Create your pitch based on this fact, and the capital will be more natural too secure. For more information on how to obtain capital using a private lender or a money partner Click Here.
Raising capital to begin building your real estate portfolio has many avenues, and each has its pro and con. Building awareness of these avenues, having a realistic understanding of the ROI and overcoming the fear of loss are ingredients to a successful campaign to raising capital.