Real estate usually involves properties that cost so much that no one person has that amount of money. So what does one do to raise the capital needed to purchase real estate?
The answer is financial leverage. Financial leverage and real estate go hand in hand. Almost everyone cannot afford to pay cash for a house on the day they purchase it. Loans make purchasing real estate available to people who do not have the capital needed to purchase the house today.
This Forbes article describes some of the best ways to get capital to fund a real estate project.
http://www.forbes.com/2010/07/06/best-funding-sources-for-small-business-entrepreneurs-finance-dileep-rao_2.html
Some ways to get capital include:
Bank Loans
Family/Friends
Customers
Vendors
SBA(7) Loans
Local and State economic organizations
For some creative financing, this article states the IRS can deduct certain expenses so that will decrease the overall price.
This link provides the different types of mortgage loans one can use to purchase real estate:
http://www.realestatebriefings.com/mortgages/types-of-mortgage-loans/
1. Conventional mortgage - offers a fixed rate.
2. Adjustable rate mortgages - carry an interest rate that changes to keep pace with current market rates. This is a good idea for buyers planning to stay in their home for a short time.
3. Veteran Affairs loans - are great because they provide the opportunity to buy a home with no down payment.
4. Assumable mortgage - is a loan that stays with the property. It is simply transferred to the qualified home buyer.
I believe financing is good for real estate and loans are very important for the survival of the real estate market.
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