January 5, 2025 • 15 mins
This episode explores various strategies for financing real estate investments, emphasizing creative methods beyond traditional bank loans. It covers FHA loans, hard money lending, private money lending, partnerships, seller financing, crowdfunding, REITs, and grants, providing valuable insights for both new and seasoned investors.
• Overview of traditional bank loans and their requirements
• Advantages of FHA loans for first-time buyers
• Quick access to capital through hard money loans
• The role of private money lending in real estate financing
• Benefits and strategies of partnerships and joint ventures
• Understanding real estate syndication and its appeal
• Custom financing through seller financing
• The crowdfunding revolution in real estate investment
• Introduction to REITs and their passive income potential
• Exploring community grants and subsidies for real estate projects
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back to the Deep Dive.
Today we're going to be divinginto all the different ways you
can finance real estateinvestments.
Speaker 2 (00:08):
Oh yeah.
Speaker 1 (00:09):
It's a lot more than just going to the bank and
getting a loan.
We're going to explore allkinds of creative strategies
that you might not even knowexist.
Speaker 2 (00:17):
Absolutely.
It's a whole world out there.
Speaker 1 (00:20):
But first we've got to give a shout out to our
sponsor, flowers and AssociatesProperty Rentals.
Yes, they offer free workshopsand some really cool investment
opportunities where you can getlike up to 33% returns.
Wow, yeah, you can invest like$1,000 and see some serious
growth.
That's incredible so if you'reinterested, check out their
(00:40):
website Flowersandassociatesnetor give them a call at
901-621-3544.
Awesome, now you know.
Speaking of real estate, youmight remember Robert Flatters
from our episodes on specialneeds.
Speaker 2 (00:54):
Oh yeah, he was great .
Speaker 1 (00:55):
Well, he's also a real estate guru.
He just released a new bookcalled Real Estate Investment
Strategies for Beginners theBasics of Property Rentals and
Wholesaling.
I saw that for beginners thebasics of property rentals and
wholesaling.
I saw that it's available onAmazon and it's like the perfect
guide for anyone who's juststarting out in real estate.
Speaker 2 (01:10):
Yeah, Robert's really good at explaining things
simply.
Speaker 1 (01:12):
Okay, so let's get into those financing strategies.
I know a lot of people startwith the traditional bank loans.
What are the key things youshould know about those?
Speaker 2 (01:21):
Well with traditional bank loans.
They're great for long-terminvestments like rental
properties or your own home,right.
But you do need a good creditscore and usually a 20% down
payment 20%.
Speaker 1 (01:35):
That's a lot of money .
Is there like any way aroundthat, especially if you're a
first-time buyer?
Speaker 2 (01:40):
Yeah, there are definitely some options.
You could look into FHA loans.
They're government-back backedand only require a 3.5 percent
down payment.
Speaker 1 (01:47):
Oh wow, that's a huge difference 3.5 percent versus
20 percent.
Speaker 2 (01:50):
Exactly so.
You know, it makes it a lotmore accessible for first time
buyers or people with maybe alittle bit lower credit.
Speaker 1 (01:58):
That's awesome.
Are there any like downsides toFHA loans?
Speaker 2 (02:03):
Well, usually you have to pay mortgage insurance,
which adds a little bit to yourmonthly payment.
Speaker 1 (02:08):
Ah, I see.
Speaker 2 (02:08):
But you know, on the plus side you're able to buy a
property with less cash up front.
Speaker 1 (02:14):
Right right.
Speaker 2 (02:15):
And here's something a lot of people don't realize
you can actually use an FHA loanfor multifamily properties up
to four units.
Wait really yeah, as long asyou live in one of the units.
Speaker 1 (02:26):
Oh, that's interesting.
So you could potentially liverent free while having tenants
help pay your mortgage.
Speaker 2 (02:33):
Yeah, exactly, it's a great strategy for building
equity and, you know, generatingsome passive income.
Speaker 1 (02:39):
That's pretty smart.
So we've got traditional bankloans, we've got FHA loans.
What if you need financing,like really quickly, or maybe
your credit score isn't so great?
Speaker 2 (02:48):
Well then, we got to move away from the banks and
into hard money loans.
Speaker 1 (02:51):
Hard money loans.
That sounds a little intense.
Speaker 2 (02:57):
Yeah, it can be a little bit more risky, but it's
definitely a lot faster.
Speaker 1 (03:01):
Okay, so what are they exactly?
Speaker 2 (03:02):
So with hard money loans you're usually dealing
with private lenders, you knowspecialized companies and it's
all about speed.
You could get approved andfunded in a week, sometimes even
faster.
Speaker 1 (03:12):
A week.
Yeah, that's crazy compared tothe banks.
Oh yeah, but there's got to besome downsides, right.
Speaker 2 (03:17):
Well, yeah, the interest rates are higher.
You're looking at like 10, 15%,and the terms are shorter, you
know, usually six to 24 months.
Speaker 1 (03:26):
So it's kind of like a short term bridge loan.
Speaker 2 (03:28):
Yeah, exactly.
Speaker 1 (03:29):
When would you like choose that over a traditional
bank loan?
Speaker 2 (03:32):
Well, hard money loans are more focused on the
property's value rather thanyour credit history.
So let's say you find anamazing deal.
You know a property that needssome work.
You need to move quickly.
That's when hard money canreally come in handy.
Speaker 1 (03:48):
So you're not letting your credit score hold you back
from a great opportunity.
Speaker 2 (03:50):
I like that Exactly.
Speaker 1 (03:52):
Now what if you don't want to go through a bank or
even a private lender?
Are there ways to finance realestate deals within your own
like network of people?
Speaker 2 (04:02):
Oh for sure, there's something called private money
lending.
That's when you borrow fromfriends, family or even business
associates.
Speaker 1 (04:07):
Oh, interesting, but that sounds a little risky too.
Right, mixing money withpersonal relationships?
Speaker 2 (04:14):
Yeah, it definitely can be, which is why you have to
treat it just like any otherbusiness deal.
Clear communication, formalagreements, a solid repayment
plan all of that is crucial.
Speaker 1 (04:24):
So setting clear boundaries from the beginning.
Speaker 2 (04:26):
Exactly what?
Speaker 1 (04:27):
are the advantages of going this route.
Speaker 2 (04:30):
Well, the great thing about private money lending is
the flexibility.
You can often negotiate termsand interest rates that work for
both sides.
Speaker 1 (04:37):
That's cool.
Speaker 2 (04:38):
It's all about creating win-win scenarios.
Plus, it can be a lifeline ifyou don't qualify for a
traditional loan.
Speaker 1 (04:44):
Win-win scenarios.
I like that.
Speaking of collaboration,let's talk about partnerships
and joint ventures.
What are the benefits ofteaming up with others in real
estate?
Speaker 2 (04:54):
Oh, partnerships and joint ventures can be incredibly
powerful.
You're basically combiningsources.
You know, maybe one partnerbrings the capital, the other
has experience with renovationsor property management.
Speaker 1 (05:05):
So each person brings their strengths to the table.
Speaker 2 (05:08):
Exactly.
By pooling your resources andskills, you can tackle bigger,
more ambitious projects.
Plus, you're spreading the risk.
Speaker 1 (05:15):
Oh, that makes sense.
Less risk, more resources,bigger rewards.
Sounds like a smart way toapproach real estate.
Speaker 2 (05:21):
Absolutely.
Speaker 1 (05:22):
Now, where does real estate syndication fit into all
of this?
Speaker 2 (05:24):
So syndication takes collaboration to the next level.
You have a lead investor calledthe syndicator, who finds a
promising project you know, putstogether the investment plan
and manages the property.
Speaker 1 (05:36):
So they're like the captain of the ship.
Speaker 2 (05:39):
Exactly.
And then they bring in otherinvestors who contribute capital
and in return get a share ofthe profits.
Speaker 1 (05:44):
So you can get involved in, like larger
projects, maybe commercialproperties or apartment
complexes, without having to doeverything yourself.
Speaker 2 (05:52):
Yeah, that's the main draw.
It lets investors diversifytheir portfolios and get into
deals they wouldn't normallyhave access to.
Speaker 1 (05:59):
But I imagine it takes a certain kind of person
to be a successful syndicator.
Right, Definitely.
Speaker 2 (06:03):
You need a proven track record, a strong vision
and excellent communicationskills.
It's all about building trustand showcasing your expertise to
attract those investors.
Speaker 1 (06:13):
OK, so we've talked about bank loans, partnerships,
syndications.
What about some of those likemore creative financing
strategies?
What if you don't qualify for atraditional loan or just want
to, you know, try somethingdifferent?
Speaker 2 (06:26):
Well, there's always seller financing.
That can be a reallyinteresting option for both
sides of the deal.
Speaker 1 (06:31):
Seller financing.
So the seller is kind of actinglike the bank right.
Speaker 2 (06:34):
Exactly.
Speaker 1 (06:34):
I've heard about it, but how does that actually work?
Speaker 2 (06:36):
Basically, the buyer and seller just agree on the
terms of the loan, you know thepurchase price, interest rate,
repayment schedule, all thatstuff.
Speaker 1 (06:45):
So it's like a custom-made loan.
Speaker 2 (06:46):
Pretty much and it can be a win-win Like maybe the
seller's having trouble findinga buyer the traditional way, so
they're more open to financingand for the buyer it could be a
way to get into a property evenwith, you know, less than
perfect credit or not a hugedown payment.
Speaker 1 (07:02):
Oh, that's pretty cool, yeah, so both sides can
benefit.
What about lease options.
I know those are popular, butI've never really understood how
they work.
Speaker 2 (07:10):
Yeah, lease options or rent to own.
It's kind of like a hybridbetween renting and buying.
You're basically securing theproperty with the option to buy
it later.
Speaker 1 (07:20):
Okay, walk me through that.
How does it work?
Speaker 2 (07:22):
So typically you'd pay an upfront option fee to the
seller which gives you theright to buy the property at a
set price within a certain timeframe and then get.
This part of your monthly rentmight actually go towards your
down payment if you decide tobuy oh wow.
Speaker 1 (07:37):
So you're kind of locking in a purchase price and
building equity at the same time.
Speaker 2 (07:41):
Exactly, and it gives you time to maybe improve your
credit or save up for a biggerdown payment.
Speaker 1 (07:47):
That's pretty smart.
Are there any like catches?
Speaker 2 (07:51):
Well, the main thing is, if you decide not to buy at
the end of the lease, you losethat option fee and any rent
credits you've built up.
Speaker 1 (07:58):
Ah, so you got to be sure you really want the
property.
Speaker 2 (08:01):
Yeah, exactly, it's not something to jump into
lightly.
Speaker 1 (08:03):
Okay, so let's talk about crowdfunding.
That's something that's likereally blown up in recent years.
Speaker 2 (08:07):
Oh yeah, it's completely changed the game for
real estate investing.
Speaker 1 (08:11):
But how does it actually work?
Do you just like post yourproject online and hope people
throw money at it?
Speaker 2 (08:16):
Do you just like post your project online and hope
people throw money at it.
It's a little more organizedthan that.
There are these onlineplatforms like Fundrise and
Realty Mogul that connect realestate developers with investors
.
Speaker 1 (08:26):
Right.
Speaker 2 (08:26):
And they do all the due diligence you know vetting
the projects, managing theinvestments and all that.
Speaker 1 (08:31):
So it adds some legitimacy, especially if you're
a new investor.
Definitely so.
Could you like invest in a huge, multimmillion dollar project
with just a few thousand bucks?
Speaker 2 (08:41):
Absolutely.
That's the beauty ofcrowdfunding You're pooling your
resources with other investors,which reduces your individual
risk, and you get access tothese like potentially high
return opportunities that youwouldn't have been able to touch
before.
Speaker 1 (08:54):
That's really cool.
It's like dipping your toesinto all these different types
of projects without needing aton of cash up front.
Speaker 2 (09:00):
Exactly.
Speaker 1 (09:00):
Now what about REITs real estate investment trusts?
How do those compare tocrowdfunding?
Speaker 2 (09:06):
REITs are a little different.
They're companies that own andoperate income producing real
estate like big shopping malls,office buildings, apartment
complexes, that kind of stuffand instead of owning a property
directly, you're buying sharesin the REIT just like you would
with any other company on thestock market.
Speaker 1 (09:22):
So you're owning a piece of a company that owns a
bunch of properties.
Speaker 2 (09:25):
Exactly.
Speaker 1 (09:26):
What are the benefits of that versus just buying a
property yourself?
Speaker 2 (09:30):
Well, reits typically pay out dividends, so that's a
nice steady stream of passiveincome, and they also have the
potential for growth as thevalue of the underlying real
estate goes up, so it's like youget the benefits of real estate
without having to deal withbeing a landlord.
Exactly.
You let the professionalshandle all the property
management, tenant issues, allthat, and you're also
(09:53):
diversifying your portfolioacross a bunch of different
properties and locations.
Speaker 1 (09:56):
That's pretty appealing.
Speaker 2 (09:57):
Yeah.
Speaker 1 (09:58):
Okay, let's shift gears a bit and talk about some
more specialized real estatestrategies.
I'm really curious aboutwholesaling what exactly is that
?
Speaker 2 (10:08):
So?
Wholesaling is basically whereyou act as a middleman between a
motivated seller and a buyer.
The key is finding thoseproperties that are below market
value.
Speaker 1 (10:17):
Okay.
Speaker 2 (10:18):
You know, maybe the seller needs to get rid of the
property quickly or they're insome kind of financial distress.
You get the property undercontract and then you assign
that contract to another buyer,usually someone with cash or a
rehabber who's going to fix itup and flip it.
Speaker 1 (10:31):
So you're not actually buying the property
yourself, you're just likecontrolling it through the
contract.
Speaker 2 (10:35):
Yeah, that's right.
Speaker 1 (10:43):
And you make your profit by selling that contract
to the end buyer.
So it's a low capital way toget into real estate, but it
sounds kind of risky too.
What if you can't find a buyerfor the contract?
Speaker 2 (10:47):
Yeah, that's the biggest risk.
If you can't assign thecontract, you might end up
having to buy the propertyyourself, and that might not be
part of the plan.
Speaker 1 (10:55):
So you got to know what you're doing.
No-transcript.
Okay, now let's talk aboutgrants and subsidies.
I know those are usuallyassociated with affordable
housing or community developmentprojects.
How can investors use those fortheir real estate ventures?
Speaker 2 (11:15):
Grants and subsidies can be amazing for investors who
are looking to make adifference in their communities.
There are all these programs atthe federal, state and local
level that offer financialassistance for projects that
meet certain criteria.
Speaker 1 (11:28):
Like, what kind of criteria?
Speaker 2 (11:29):
Things like providing affordable housing units,
revitalizing distressedneighborhoods.
You know, projects that benefitthe community as a whole.
Speaker 1 (11:37):
So it's a way to combine, like your financial
goals with a social missionExactly, but I imagine it's
pretty tough to navigate allthese programs and find the
right opportunities.
Where do you even start?
Speaker 2 (11:48):
It does take some research, but it's definitely
worth it.
You can start by checking withyour local housing authority,
community developmentorganizations, government
agencies.
There are also online resourcesthat can help you find
potential programs.
Speaker 1 (12:01):
For a lot of digging and networking.
Speaker 2 (12:02):
Yeah, but the rewards can be huge, both financially
and in terms of making apositive impact.
Speaker 1 (12:08):
I love that We've covered so much ground today,
from bank loans to crowdfundingto wholesaling.
I bet there are even morecreative financing strategies
out there that we haven't eventouched on.
Speaker 2 (12:18):
Oh, absolutely.
Real estate is constantlyevolving and there are always
new and innovative financingstrategies popping up.
Speaker 1 (12:26):
What are some of the things that are like on the
cutting edge right now?
Speaker 2 (12:30):
Well, there's this strategy called a master lease
option, which is kind of acombination of leasing and
options.
Speaker 1 (12:36):
Okay.
Speaker 2 (12:37):
It lets an investor control a property for a longer
period, often with a portion ofthe rent going towards the
purchase price down the line.
Speaker 1 (12:45):
So it's another way to get to do a property without
a huge upfront investment.
Speaker 2 (12:48):
Exactly, it can be a really strategic way to acquire
properties, especially in hotmarkets where traditional
financing might be tough to get.
Speaker 1 (12:55):
It's amazing how many options there are right.
I mean, we've gone from bankloans to crowdfunding to even
these master lease options.
It seems like there's like astrategy for everyone.
Speaker 2 (13:08):
Yeah, exactly that's what I love about real estate
investing.
There's no one right way to doit.
You got to find what works foryou, your goals, your risk
tolerance, you know.
Speaker 1 (13:17):
So what's the most important thing our listeners
should take away from all ofthis, like, what advice would
you give to someone who's juststarting out in real estate?
Speaker 2 (13:25):
Do your homework, research everything, understand
the risks and the rewards, anddon't be afraid to ask for help
from people who know whatthey're doing.
Speaker 1 (13:34):
That makes sense.
You wouldn't just jump into anyother investment without you
know, doing your research.
So who are some of theprofessionals that you'd
recommend talking to?
Speaker 2 (13:42):
Oh, definitely talk to a real estate attorney, an
accountant, maybe a financialadvisor.
They can help you with all thelegal and financial stuff.
Make sure you're making smartdecisions and you know, saving
money on taxes.
Speaker 1 (13:54):
Okay, so it's like building a team of experts to
support you.
Speaker 2 (13:58):
Exactly.
Speaker 1 (13:59):
And remember real estate is a long game.
It's not about getting richquick, it's about building
wealth over time.
Yeah, slow and steady wins therace.
Speaker 2 (14:05):
It's about building wealth over time.
Yeah, slow and steady wins therace.
Speaker 1 (14:08):
Now are there any like red flags things people
should watch out for when itcomes to financing Mistakes that
people often make.
Speaker 2 (14:15):
Oh for sure.
One big one is just focusing onthe interest rate and not
looking at the whole picture.
Yeah, a low interest rate mightsound great, but but there
could be all these hidden feesor weird terms that end up
costing you more in the long run.
Speaker 1 (14:28):
So you got to read the fine print basically.
Speaker 2 (14:30):
Exactly.
Look at the terms, the fees,check out the lender's
reputation, make sure everythingfits with your overall plan and
don't be afraid to negotiate.
Speaker 1 (14:40):
Yeah, you have the power, All right.
So, as we wrap up our deep diveinto real estate financing, I
want to leave everyone with onefinal thought.
Dive into real estate financing, I want to leave everyone with
one final thought.
What are some of the emergingtrends or untapped opportunities
in this world, things thatinvestors should be keeping an
eye?
Speaker 2 (14:55):
on?
That's a good question.
I think we're going to see evenmore innovation in crowdfunding
, with platforms offering morespecialized investments, and,
who knows, maybe blockchaintechnology will start playing a
bigger role in real estate.
You know, making things moreefficient and transparent.
Speaker 1 (15:10):
It's exciting, right Like there's so much potential
and new stuff happening all thetime.
Speaker 2 (15:16):
Yeah, definitely.
It's a great time to be in realestate.
Speaker 1 (15:19):
So to all our listeners stay curious, keep
learning and keep exploring.
There's a whole world ofopportunity out there.
Speaker 2 (15:25):
Absolutely, and remember knowledge is power.
The more you know, the betterdecisions you'll make.
Speaker 1 (15:31):
Well said.
Thanks for joining us on thisdeep dive into real estate
financing.
We hope you found it helpfuland inspiring.
Speaker 2 (15:37):
Our pleasure.
Speaker 1 (15:39):
Until next time, keep diving deep.
Welcome back to the Deep Dive.
Today we're going to be divinginto all the different ways you
can finance real estateinvestments.
Speaker 2 (00:08):
Oh yeah.
Speaker 1 (00:09):
It's a lot more than just going to the bank and
getting a loan.
We're going to explore allkinds of creative strategies
that you might not even knowexist.
Speaker 2 (00:17):
Absolutely.
It's a whole world out there.
Speaker 1 (00:20):
But first we've got to give a shout out to our
sponsor, flowers and AssociatesProperty Rentals.
Yes, they offer free workshopsand some really cool investment
opportunities where you can getlike up to 33% returns.
Wow, yeah, you can invest like$1,000 and see some serious
growth.
That's incredible so if you'reinterested, check out their
(00:40):
website Flowersandassociatesnetor give them a call at
901-621-3544.
Awesome, now you know.
Speaking of real estate, youmight remember Robert Flatters
from our episodes on specialneeds.
Speaker 2 (00:54):
Oh yeah, he was great .
Speaker 1 (00:55):
Well, he's also a real estate guru.
He just released a new bookcalled Real Estate Investment
Strategies for Beginners theBasics of Property Rentals and
Wholesaling.
I saw that for beginners thebasics of property rentals and
wholesaling.
I saw that it's available onAmazon and it's like the perfect
guide for anyone who's juststarting out in real estate.
Speaker 2 (01:10):
Yeah, Robert's really good at explaining things
simply.
Speaker 1 (01:12):
Okay, so let's get into those financing strategies.
I know a lot of people startwith the traditional bank loans.
What are the key things youshould know about those?
Speaker 2 (01:21):
Well with traditional bank loans.
They're great for long-terminvestments like rental
properties or your own home,right.
But you do need a good creditscore and usually a 20% down
payment 20%.
Speaker 1 (01:35):
That's a lot of money .
Is there like any way aroundthat, especially if you're a
first-time buyer?
Speaker 2 (01:40):
Yeah, there are definitely some options.
You could look into FHA loans.
They're government-back backedand only require a 3.5 percent
down payment.
Speaker 1 (01:47):
Oh wow, that's a huge difference 3.5 percent versus
20 percent.
Speaker 2 (01:50):
Exactly so.
You know, it makes it a lotmore accessible for first time
buyers or people with maybe alittle bit lower credit.
Speaker 1 (01:58):
That's awesome.
Are there any like downsides toFHA loans?
Speaker 2 (02:03):
Well, usually you have to pay mortgage insurance,
which adds a little bit to yourmonthly payment.
Speaker 1 (02:08):
Ah, I see.
Speaker 2 (02:08):
But you know, on the plus side you're able to buy a
property with less cash up front.
Speaker 1 (02:14):
Right right.
Speaker 2 (02:15):
And here's something a lot of people don't realize
you can actually use an FHA loanfor multifamily properties up
to four units.
Wait really yeah, as long asyou live in one of the units.
Speaker 1 (02:26):
Oh, that's interesting.
So you could potentially liverent free while having tenants
help pay your mortgage.
Speaker 2 (02:33):
Yeah, exactly, it's a great strategy for building
equity and, you know, generatingsome passive income.
Speaker 1 (02:39):
That's pretty smart.
So we've got traditional bankloans, we've got FHA loans.
What if you need financing,like really quickly, or maybe
your credit score isn't so great?
Speaker 2 (02:48):
Well then, we got to move away from the banks and
into hard money loans.
Speaker 1 (02:51):
Hard money loans.
That sounds a little intense.
Speaker 2 (02:57):
Yeah, it can be a little bit more risky, but it's
definitely a lot faster.
Speaker 1 (03:01):
Okay, so what are they exactly?
Speaker 2 (03:02):
So with hard money loans you're usually dealing
with private lenders, you knowspecialized companies and it's
all about speed.
You could get approved andfunded in a week, sometimes even
faster.
Speaker 1 (03:12):
A week.
Yeah, that's crazy compared tothe banks.
Oh yeah, but there's got to besome downsides, right.
Speaker 2 (03:17):
Well, yeah, the interest rates are higher.
You're looking at like 10, 15%,and the terms are shorter, you
know, usually six to 24 months.
Speaker 1 (03:26):
So it's kind of like a short term bridge loan.
Speaker 2 (03:28):
Yeah, exactly.
Speaker 1 (03:29):
When would you like choose that over a traditional
bank loan?
Speaker 2 (03:32):
Well, hard money loans are more focused on the
property's value rather thanyour credit history.
So let's say you find anamazing deal.
You know a property that needssome work.
You need to move quickly.
That's when hard money canreally come in handy.
Speaker 1 (03:48):
So you're not letting your credit score hold you back
from a great opportunity.
Speaker 2 (03:50):
I like that Exactly.
Speaker 1 (03:52):
Now what if you don't want to go through a bank or
even a private lender?
Are there ways to finance realestate deals within your own
like network of people?
Speaker 2 (04:02):
Oh for sure, there's something called private money
lending.
That's when you borrow fromfriends, family or even business
associates.
Speaker 1 (04:07):
Oh, interesting, but that sounds a little risky too.
Right, mixing money withpersonal relationships?
Speaker 2 (04:14):
Yeah, it definitely can be, which is why you have to
treat it just like any otherbusiness deal.
Clear communication, formalagreements, a solid repayment
plan all of that is crucial.
Speaker 1 (04:24):
So setting clear boundaries from the beginning.
Speaker 2 (04:26):
Exactly what?
Speaker 1 (04:27):
are the advantages of going this route.
Speaker 2 (04:30):
Well, the great thing about private money lending is
the flexibility.
You can often negotiate termsand interest rates that work for
both sides.
Speaker 1 (04:37):
That's cool.
Speaker 2 (04:38):
It's all about creating win-win scenarios.
Plus, it can be a lifeline ifyou don't qualify for a
traditional loan.
Speaker 1 (04:44):
Win-win scenarios.
I like that.
Speaking of collaboration,let's talk about partnerships
and joint ventures.
What are the benefits ofteaming up with others in real
estate?
Speaker 2 (04:54):
Oh, partnerships and joint ventures can be incredibly
powerful.
You're basically combiningsources.
You know, maybe one partnerbrings the capital, the other
has experience with renovationsor property management.
Speaker 1 (05:05):
So each person brings their strengths to the table.
Speaker 2 (05:08):
Exactly.
By pooling your resources andskills, you can tackle bigger,
more ambitious projects.
Plus, you're spreading the risk.
Speaker 1 (05:15):
Oh, that makes sense.
Less risk, more resources,bigger rewards.
Sounds like a smart way toapproach real estate.
Speaker 2 (05:21):
Absolutely.
Speaker 1 (05:22):
Now, where does real estate syndication fit into all
of this?
Speaker 2 (05:24):
So syndication takes collaboration to the next level.
You have a lead investor calledthe syndicator, who finds a
promising project you know, putstogether the investment plan
and manages the property.
Speaker 1 (05:36):
So they're like the captain of the ship.
Speaker 2 (05:39):
Exactly.
And then they bring in otherinvestors who contribute capital
and in return get a share ofthe profits.
Speaker 1 (05:44):
So you can get involved in, like larger
projects, maybe commercialproperties or apartment
complexes, without having to doeverything yourself.
Speaker 2 (05:52):
Yeah, that's the main draw.
It lets investors diversifytheir portfolios and get into
deals they wouldn't normallyhave access to.
Speaker 1 (05:59):
But I imagine it takes a certain kind of person
to be a successful syndicator.
Right, Definitely.
Speaker 2 (06:03):
You need a proven track record, a strong vision
and excellent communicationskills.
It's all about building trustand showcasing your expertise to
attract those investors.
Speaker 1 (06:13):
OK, so we've talked about bank loans, partnerships,
syndications.
What about some of those likemore creative financing
strategies?
What if you don't qualify for atraditional loan or just want
to, you know, try somethingdifferent?
Speaker 2 (06:26):
Well, there's always seller financing.
That can be a reallyinteresting option for both
sides of the deal.
Speaker 1 (06:31):
Seller financing.
So the seller is kind of actinglike the bank right.
Speaker 2 (06:34):
Exactly.
Speaker 1 (06:34):
I've heard about it, but how does that actually work?
Speaker 2 (06:36):
Basically, the buyer and seller just agree on the
terms of the loan, you know thepurchase price, interest rate,
repayment schedule, all thatstuff.
Speaker 1 (06:45):
So it's like a custom-made loan.
Speaker 2 (06:46):
Pretty much and it can be a win-win Like maybe the
seller's having trouble findinga buyer the traditional way, so
they're more open to financingand for the buyer it could be a
way to get into a property evenwith, you know, less than
perfect credit or not a hugedown payment.
Speaker 1 (07:02):
Oh, that's pretty cool, yeah, so both sides can
benefit.
What about lease options.
I know those are popular, butI've never really understood how
they work.
Speaker 2 (07:10):
Yeah, lease options or rent to own.
It's kind of like a hybridbetween renting and buying.
You're basically securing theproperty with the option to buy
it later.
Speaker 1 (07:20):
Okay, walk me through that.
How does it work?
Speaker 2 (07:22):
So typically you'd pay an upfront option fee to the
seller which gives you theright to buy the property at a
set price within a certain timeframe and then get.
This part of your monthly rentmight actually go towards your
down payment if you decide tobuy oh wow.
Speaker 1 (07:37):
So you're kind of locking in a purchase price and
building equity at the same time.
Speaker 2 (07:41):
Exactly, and it gives you time to maybe improve your
credit or save up for a biggerdown payment.
Speaker 1 (07:47):
That's pretty smart.
Are there any like catches?
Speaker 2 (07:51):
Well, the main thing is, if you decide not to buy at
the end of the lease, you losethat option fee and any rent
credits you've built up.
Speaker 1 (07:58):
Ah, so you got to be sure you really want the
property.
Speaker 2 (08:01):
Yeah, exactly, it's not something to jump into
lightly.
Speaker 1 (08:03):
Okay, so let's talk about crowdfunding.
That's something that's likereally blown up in recent years.
Speaker 2 (08:07):
Oh yeah, it's completely changed the game for
real estate investing.
Speaker 1 (08:11):
But how does it actually work?
Do you just like post yourproject online and hope people
throw money at it?
Speaker 2 (08:16):
Do you just like post your project online and hope
people throw money at it.
It's a little more organizedthan that.
There are these onlineplatforms like Fundrise and
Realty Mogul that connect realestate developers with investors
.
Speaker 1 (08:26):
Right.
Speaker 2 (08:26):
And they do all the due diligence you know vetting
the projects, managing theinvestments and all that.
Speaker 1 (08:31):
So it adds some legitimacy, especially if you're
a new investor.
Definitely so.
Could you like invest in a huge, multimmillion dollar project
with just a few thousand bucks?
Speaker 2 (08:41):
Absolutely.
That's the beauty ofcrowdfunding You're pooling your
resources with other investors,which reduces your individual
risk, and you get access tothese like potentially high
return opportunities that youwouldn't have been able to touch
before.
Speaker 1 (08:54):
That's really cool.
It's like dipping your toesinto all these different types
of projects without needing aton of cash up front.
Speaker 2 (09:00):
Exactly.
Speaker 1 (09:00):
Now what about REITs real estate investment trusts?
How do those compare tocrowdfunding?
Speaker 2 (09:06):
REITs are a little different.
They're companies that own andoperate income producing real
estate like big shopping malls,office buildings, apartment
complexes, that kind of stuffand instead of owning a property
directly, you're buying sharesin the REIT just like you would
with any other company on thestock market.
Speaker 1 (09:22):
So you're owning a piece of a company that owns a
bunch of properties.
Speaker 2 (09:25):
Exactly.
Speaker 1 (09:26):
What are the benefits of that versus just buying a
property yourself?
Speaker 2 (09:30):
Well, reits typically pay out dividends, so that's a
nice steady stream of passiveincome, and they also have the
potential for growth as thevalue of the underlying real
estate goes up, so it's like youget the benefits of real estate
without having to deal withbeing a landlord.
Exactly.
You let the professionalshandle all the property
management, tenant issues, allthat, and you're also
(09:53):
diversifying your portfolioacross a bunch of different
properties and locations.
Speaker 1 (09:56):
That's pretty appealing.
Speaker 2 (09:57):
Yeah.
Speaker 1 (09:58):
Okay, let's shift gears a bit and talk about some
more specialized real estatestrategies.
I'm really curious aboutwholesaling what exactly is that
?
Speaker 2 (10:08):
So?
Wholesaling is basically whereyou act as a middleman between a
motivated seller and a buyer.
The key is finding thoseproperties that are below market
value.
Speaker 1 (10:17):
Okay.
Speaker 2 (10:18):
You know, maybe the seller needs to get rid of the
property quickly or they're insome kind of financial distress.
You get the property undercontract and then you assign
that contract to another buyer,usually someone with cash or a
rehabber who's going to fix itup and flip it.
Speaker 1 (10:31):
So you're not actually buying the property
yourself, you're just likecontrolling it through the
contract.
Speaker 2 (10:35):
Yeah, that's right.
Speaker 1 (10:43):
And you make your profit by selling that contract
to the end buyer.
So it's a low capital way toget into real estate, but it
sounds kind of risky too.
What if you can't find a buyerfor the contract?
Speaker 2 (10:47):
Yeah, that's the biggest risk.
If you can't assign thecontract, you might end up
having to buy the propertyyourself, and that might not be
part of the plan.
Speaker 1 (10:55):
So you got to know what you're doing.
No-transcript.
Okay, now let's talk aboutgrants and subsidies.
I know those are usuallyassociated with affordable
housing or community developmentprojects.
How can investors use those fortheir real estate ventures?
Speaker 2 (11:15):
Grants and subsidies can be amazing for investors who
are looking to make adifference in their communities.
There are all these programs atthe federal, state and local
level that offer financialassistance for projects that
meet certain criteria.
Speaker 1 (11:28):
Like, what kind of criteria?
Speaker 2 (11:29):
Things like providing affordable housing units,
revitalizing distressedneighborhoods.
You know, projects that benefitthe community as a whole.
Speaker 1 (11:37):
So it's a way to combine, like your financial
goals with a social missionExactly, but I imagine it's
pretty tough to navigate allthese programs and find the
right opportunities.
Where do you even start?
Speaker 2 (11:48):
It does take some research, but it's definitely
worth it.
You can start by checking withyour local housing authority,
community developmentorganizations, government
agencies.
There are also online resourcesthat can help you find
potential programs.
Speaker 1 (12:01):
For a lot of digging and networking.
Speaker 2 (12:02):
Yeah, but the rewards can be huge, both financially
and in terms of making apositive impact.
Speaker 1 (12:08):
I love that We've covered so much ground today,
from bank loans to crowdfundingto wholesaling.
I bet there are even morecreative financing strategies
out there that we haven't eventouched on.
Speaker 2 (12:18):
Oh, absolutely.
Real estate is constantlyevolving and there are always
new and innovative financingstrategies popping up.
Speaker 1 (12:26):
What are some of the things that are like on the
cutting edge right now?
Speaker 2 (12:30):
Well, there's this strategy called a master lease
option, which is kind of acombination of leasing and
options.
Speaker 1 (12:36):
Okay.
Speaker 2 (12:37):
It lets an investor control a property for a longer
period, often with a portion ofthe rent going towards the
purchase price down the line.
Speaker 1 (12:45):
So it's another way to get to do a property without
a huge upfront investment.
Speaker 2 (12:48):
Exactly, it can be a really strategic way to acquire
properties, especially in hotmarkets where traditional
financing might be tough to get.
Speaker 1 (12:55):
It's amazing how many options there are right.
I mean, we've gone from bankloans to crowdfunding to even
these master lease options.
It seems like there's like astrategy for everyone.
Speaker 2 (13:08):
Yeah, exactly that's what I love about real estate
investing.
There's no one right way to doit.
You got to find what works foryou, your goals, your risk
tolerance, you know.
Speaker 1 (13:17):
So what's the most important thing our listeners
should take away from all ofthis, like, what advice would
you give to someone who's juststarting out in real estate?
Speaker 2 (13:25):
Do your homework, research everything, understand
the risks and the rewards, anddon't be afraid to ask for help
from people who know whatthey're doing.
Speaker 1 (13:34):
That makes sense.
You wouldn't just jump into anyother investment without you
know, doing your research.
So who are some of theprofessionals that you'd
recommend talking to?
Speaker 2 (13:42):
Oh, definitely talk to a real estate attorney, an
accountant, maybe a financialadvisor.
They can help you with all thelegal and financial stuff.
Make sure you're making smartdecisions and you know, saving
money on taxes.
Speaker 1 (13:54):
Okay, so it's like building a team of experts to
support you.
Speaker 2 (13:58):
Exactly.
Speaker 1 (13:59):
And remember real estate is a long game.
It's not about getting richquick, it's about building
wealth over time.
Yeah, slow and steady wins therace.
Speaker 2 (14:05):
It's about building wealth over time.
Yeah, slow and steady wins therace.
Speaker 1 (14:08):
Now are there any like red flags things people
should watch out for when itcomes to financing Mistakes that
people often make.
Speaker 2 (14:15):
Oh for sure.
One big one is just focusing onthe interest rate and not
looking at the whole picture.
Yeah, a low interest rate mightsound great, but but there
could be all these hidden feesor weird terms that end up
costing you more in the long run.
Speaker 1 (14:28):
So you got to read the fine print basically.
Speaker 2 (14:30):
Exactly.
Look at the terms, the fees,check out the lender's
reputation, make sure everythingfits with your overall plan and
don't be afraid to negotiate.
Speaker 1 (14:40):
Yeah, you have the power, All right.
So, as we wrap up our deep diveinto real estate financing, I
want to leave everyone with onefinal thought.
Dive into real estate financing, I want to leave everyone with
one final thought.
What are some of the emergingtrends or untapped opportunities
in this world, things thatinvestors should be keeping an
eye?
Speaker 2 (14:55):
on?
That's a good question.
I think we're going to see evenmore innovation in crowdfunding
, with platforms offering morespecialized investments, and,
who knows, maybe blockchaintechnology will start playing a
bigger role in real estate.
You know, making things moreefficient and transparent.
Speaker 1 (15:10):
It's exciting, right Like there's so much potential
and new stuff happening all thetime.
Speaker 2 (15:16):
Yeah, definitely.
It's a great time to be in realestate.
Speaker 1 (15:19):
So to all our listeners stay curious, keep
learning and keep exploring.
There's a whole world ofopportunity out there.
Speaker 2 (15:25):
Absolutely, and remember knowledge is power.
The more you know, the betterdecisions you'll make.
Speaker 1 (15:31):
Well said.
Thanks for joining us on thisdeep dive into real estate
financing.
We hope you found it helpfuland inspiring.
Speaker 2 (15:37):
Our pleasure.
Speaker 1 (15:39):
Until next time, keep diving deep.
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