Thursday, June 11, 2009

Top 4 Ways to Raise Money for your Real Estate Project

Most real estate investors, when starting out, are made to believe the only way to finance their real estate deals are through banks and major lending institutions. However, as the banking crisis has proven, this has become increasingly difficult.

This is the best time ever (at least in my lifetime) to invest in real estate. The prices are at historical lows and often times, deals can be found at below replacement cost. So, below are some ideas on how to get money to take advantages of the many opportunities now present.

1.) Find a good, liquid, hard money lender.

Private lenders are popping up all over the place. If you don't want to deal with individual investors via a private placement memorandum and would rather deal with one party, you could use the services of a hard money lender. However, these lenders are costly. Currently, the cost of a hard money lender is about 5 points and 12% APR.

2.) Use a private placement memorandum to find private investors.

Right now, people are very shy about investing in the stock market after seeing their 401(k)'s and IRA's be cut in half over the last year. However, many folks do not have the time to take on full time real estate investing. Therefore, they look to the professional real estate investors such as yourself to find deals. Before taking the money of a potential investor, however, you must present them with a private placement memorandum. The investor also must be qualified to invest (see other blog posts on accredited investors vs. unaccredited investors.)

3.) Start a REIT

A Real Estate Investment Trust is great if you want to purchase large projects and need large amounts of capital. It is also a structure that insures the investor that you will be making some sort of distribution every year as REIT law requires that 90% of all proceeds be distributed.

4.) Go Public

Going public is not that hard and it provides a market place for investors to sell their interest in the event they want to get out. There are reporting requirements and a financial audit is required.

To find out more about financing your real estate deals like how to go public, fund a private placement memorandum, or even find investors, attend OPTIMAL OPM on August 1st and 2nd in San Diego, CA.

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