Have you realized that NOW is a GREAT time to invest in real estate, but you just don’t have the money to do it? Here are several ways you can generate cash for your next investment to make sure you can cash on the great opportunity that this market is providing.
One big Detroit Area investor, Darrick Scruggs, the owner of My First Michigan Homeand many other companies, said, “Most of your problems will disappear if you become world-class at raising money.”
Most people will read this and think that I am stating the obvious. Many of these same people will say that they don’t have any money. If they had money, they say, THEY would be raking in millions, too.
I’m here to tell you that you NEED money, but nobody said it had to be your own. I know! Many of us have heard that, too. So how do you use “other people’s” money?
Besides using your own cash, have you considered….
1. Make Money as a Middleman: You can wholesale properties until you get enough cash to do bigger, more profitable deals.
2. Borrow from a Lending Institution: Today this is not always so easy, but can be done, still. Use the money for your investments. Don’t get distracted using that borrowed money for other things.
3. Refinance Your Home: You can (a) get more money to invest, or (b) use the reduced monthly payment to make it easier to create a positive monthly cash flow from the property or other investment that you will buy.
4. Use Credit Cards: Obviously, you have to be careful with this since most credit cards charge a high interest rate. However, if you can make a quick $20,000 profit within six (6) months, would you be willing to pay around $4,000 in interest payments? (This figure comes form borrowing $30,000 @ 30% for 6 months. Most people can get better terms on their credit cards than this.)
5. Obtain a Second Mortgage: Tap into your home equity, and use that money for a killer investment.
6. Borrow from Your Retirement (401K, 403b, Roth, SEP, etc.) Account: You can use this as collateral for a loan and use this money for investments.
7. Solicit Other Active Investors: These people are always looking for ways either to have their money work for them harder or make good money without them having to do any work.
8. Use Money from Passive Investors: How many people do you know complain about their 401K shrinking? They have less control over the bigwigs at the companies overseeing mutual funds than they do you. If you know how to make them money and can show them how you are going to make them money, many of these people will feel safer investing with you. Many of these people would be delighted if you could promise them a return of 8% – 10%.
9. Team with Other Investors: Sometimes, there will be a project where you have some expertise but missing another piece of it. Other times, you might have the idea but not the money or vice versa. Find a another person who has your “missing piece.”
10. Friends and Family: This is a possible source, but be careful with this one! Really!!!
11. Borrow from a Hard Money Lender: This is similar to a credit card, but while they are expensive, they often are cheaper than a credit card; however, the repayment terms are usually shorter. This is suggested more for quick turning than it is for rentals. You can use their money to gain quick chunks of money for only a small price compared to your quick profit.
12. Buy on Land Contract: Usually the price will be higher, but you do not have to use as much of your own money. Run the numbers to make sure it works for you, but several investors got started this way.
Use these techniques responsibly. These are great ideas, but if they are used improperly, you can create some tough situations for yourself. Do your due diligence on the investment opportunity. Make sure that you have a backup plan in case your main plan backfires. These are the two (2) most common investing mistakes.
Make sure that you have a plan and that you thoroughly thought out that plan. You do not want to make a habit of using borrowed money just to lose it. We all make mistakes, but make sure you do your due diligence to reduce your chance of making them. Calculate your risk.
No matter your investment, remember this! NEVER “invest” more than you can afford to lose. That’s called GAMBLING on the Hope-n-Pray method. Save this for your fun money. Feel free to ask me more questions about that.