Are you looking for the ultimate sources of real estate financing? Well, the process of financing is quite tricky. One has to go through a lot of paperwork and research to pick the perfect place from where they can get a loan with a decent interest rate and time duration. Here is a list of top real estate financing sources that one can opt for.
- 1 Top real estate financing sources
- 2 Other reliable sources that you can try
Top real estate financing sources
Venture Capitalist are known to be associated with corporations or individuals that have a high net worth. They can easily invest in any start-up if they see it has any potential. In comparison to all the traditional small business loan lenders, you can see that venture capitalist are willing to offer a humongous amount of money. The selective nature of the venture capitalist might make it hard for you to receive their approval.
Angel Investors are the type of individual that will provide funding to several new businesses or new venture. However, they will request the ownership equity or convertible debt in return. When you opt for angel investors, you are taking a lot of risks. However, one thing that will always be a benefit is that you are technically not taking any loan. You are providing a part of an acquisition of your business to that angel investor.
Traditional loans are the types of loans that one will receive from any institutionalized lender or bank. One will have to pay a relatively lower interest rate because these traditional loans have a very competitive interest rate. It has some downsides such as; it will consume a lot of time, and you will have to go through some intensive underwriting as well.
Whenever you opt for the traditional loan, you get a span from 15 to 30 years, and it will have a minimum interest rate of 4%.
Small Business Administration loans: One can get the small business administration loan from the government, and they are available in various packages. You are going to get many options to choose from. But the procedure to avail the loan is filled with many paperwork that can increase the time of availing the loan.
Private Lenders are basically those people who have enough capital and are willing to invest it. So a private lender can be your friend or someone whom you have met in any networking event. These private lenders are not licensed or institutionalized for lending money, but they can easily do it and can take their money back with added interest. The terms that are provided by the private lenders are more simple, and they will easily lend you the money within a short period. However, the interest rate can become higher.
Real Estate Crowdfunding
Crowdfunding is an interesting process where there will be a pool filled with funds that will be gathered from multiple people and sources. It is going to offer your flexible terms and which is why it is gaining a lot of popularity recently.
Hard Money Lenders
Hard Money Lenders are people who are licensed for lending money, but they are not institutionalized. They are going to provide you with short term loans, and you will have to leverage your assets. The interest rate of hard money loan is high as it can go up to 12%, but you will always get access to the capital much faster than in any other sources.
All the investors can opt for the commercial loan for purchasing any commercial property. It is quite different from the traditional loans, and the duration that is associated with the commercial loan is much longer. For minimizing the risk that is associated with the commercial loan, it will come with a lower interest rate. The process of availing the business loan is also difficult because the approval process is very stringent.
Home equity loans and lines of credit: Home equity loans and lines of credit are used to represent a particular type of credit which are not like the credit cards. When you opt for this type of loan, you are using the equity in the home as collateral.
Other reliable sources that you can try
Real Estate Investment Trusts (REITS)
Real Estate Investment Trusts are a type of pools that are filled with money from different investors when it comes to purchasing any real estate. It is quite similar to that of mutual funds. There are three different types of Real Estate Investment Trusts.
Pension Funds are known to be the new sources of availing real estate financing. Pension funds are also known to be the real estate funds. Pension funds are those funds which had been invested in various bonds and stocks.
Credit loans are the major types of loans that are made by credit unions. Here one will have to mortgage their non-residential financing and residential financing for availing the loan.
Foreign funds are also a great way to avail real estate funding. It is also an enormous scope for foreign investors who want to invest in a stable economic system.
Farmers Home Administration (FMHA)
Farmers Home Administration is an agency e of Agriculture Department of the US. There is no particular limit when you are availing this loan.
Various investors always lend money on the real estate agent or properties constantly. These investors can be an individual who has enough fund or any group of individuals who are seeking the owner of anything as a mortgage. Many investors will also ask for the equity position in the real estate.
All these sources are great when it comes to availing a loan for your real estate. Make sure you are comparing and contrasting each of them before picking anyone of them.