In my last email, I promised that I’d tell you more about getting the funding you need for your property.
The thing is, many investors see external financing as one road that they’ll take to get the funds they need. When, in fact, there are many different roads, and not all of them will lead to the same results. There are many sources of financing out there, and you need to choose the one that fits your needs and strategy.
Right off the bat, I’d like to say that working with a broker is always a great idea when you decide to invest.
There are many reasons for this.
First of all, a good broker can help you choose a source of financing that works for your specific situation. They’ll likely have some experience with similar scenarios, so their advice can be invaluable.
On top of that, brokers have a contractual obligation to act in your best interests. That means they’ll work hard to get you the deal that works best.
Now, as far as actual sources of financing go, there are many to consider.
The most common one is the major banks, which is where the majority of investors still go.
When you decide to invest, it’s a good idea to go to your bank and tell them your plans. You don’t need anything specific. Just go with a figure that you need to borrow.
Let’s say that you want to buy a property that costs $500,000. You’d go to a bank, tell them the amount you need, and ask about the process of getting the loan.
In some cases, they’ll tell you to find a property first and then come back once you do. This gives them a chance to get more details and help you figure out the next steps.
I’ve been with one bank for a long time now, and they’ve been a great support. Things get much easier if you’re with one lender for a longer time, as you can build a relationship with them. Once you do, they’ll be more willing to help you out.
Of course, there are many other sources of finance for those who don’t want to work with a major bank. For example, building societies and credit unions are both very popular options in the commercial real estate world.
Other than this, you can go with private lenders, which are usually considered second-tier lenders. If things don’t work out with a bank, they might be more open to lending you the money you need.
Of course, private lenders will likely ask you for a higher interest rate to protect themselves. However, if you find a good property, this shouldn’t be an issue.
Next, you might be able to seek vendor financing, depending on the vendor you’re working with. Some big vendors, like Meriton Properties, will give you up to 90% of the purchase price.
When all else fails, you can enter a partnership with other investors. Of course, there are lots of things to consider when working with partners on the same project. The only exception is strata properties, where you can divide the property so that everyone owns a certain part.
As you can see, there are different ways to find the finance you need to start investing. But remember to reach out to a broker, as they can be of great help.
And if there’s anything else you’d like to learn about financing, go ahead and sign up for my webinar.