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Five Fast Ways to Raise Capital for Real Estate Investment

By
Real Estate Technology with Husky Marketing

Real estate investment is one of the best ways to build and grow wealth. It offers various financial benefits ranging from tax incentives to reliable rental income. 

Despite the opportunities offered by real estate investment, the high cost of entry, such as down payments and closing fees, can be a daunting obstacle for many aspiring investors.

Types of real estate investment

Generally, there are two major categories of real estate investments: physical, such as land, residential, and commercial properties, and others, such as REITs, which do not require investors to own or manage a physical property.

Residential real estate

Residential real estate includes properties where people live or stay. Some common residential properties are single-family homes, multi-family homes, cooperatives, duplexes, townhouses, condos, and vacation homes.

Investment in residential real estate can be as straightforward as renting out a spare room or as ambitious as buying and flipping a house.

Commercial real estate

Commercial real estate is any property used exclusively for business purposes. Examples are gas stations, hospitals, hotels, theaters, restaurants, offices, and shopping centers.

Commercial properties offer the allure of higher rent and longer lease terms, potentially boosting long-term income. However, they may require larger down payments and ongoing property management expenses.

Industrial real estate

Industrial real estate is used for manufacturing, production, distribution, storage, and research and development. Such properties include warehouses, research laboratories, factories, distribution centers, and flex spaces.

Finding suitable land for developing industrial real estate properties, especially in urban areas, can be challenging.

Meanwhile, long-term leases with stable tenants like established corporations can provide reliable cash flow for investors.

Raw land

A raw land is regarded as an undeveloped property. It can be developed for commercial or residential purposes. It can also be used for agricultural purposes such as farms, orchards, ranches, and timberland.

If intended for commercial or residential development, this real estate investment will require a large amount of capital and broad knowledge of the real estate and property market.

The investor will need to navigate hurdles like zoning regulations and building codes.

Special purpose

Unlike its more versatile residential and commercial counterparts, special-purpose real estate is designed for a unique and narrow function.

These properties are custom-built and perfectly fitted for a specific activity or industry. Examples are libraries, cemeteries, government buildings, schools, and places of worship.

The specialized nature of these properties often leads to higher construction costs than standard buildings. Their unique features and equipment require specific materials and expertise, driving the price tag.

Despite their challenges, special-purpose properties can offer attractive returns for investors willing to take on the risk. Long-term leases with specialized tenants and low competition within their niche can lead to stable, high-income streams.

REITs

Real Estate Investment Trusts (REITs) are publicly traded companies that own and operate income-producing real estate, like apartments, office buildings, warehouses, shopping centers, or even cell towers.

They pool money from investors like mutual funds, but instead of stocks and bonds, they invest in real estate assets.

Compared to buying a whole property, REITs provide an easy way to invest in real estate, even with limited capital.

Fast ways to fund real estate investment

The projected value for the real estate market in 2023 is $113.60 trillion and is forecasted to reach $119.76 trillion in 2024.

Experts have also predicted an increase of 5 percent in home sales in 2024. Home rentals are also expected to spike, notably because more millennials cannot afford to buy a home.

The proliferation of e-commerce platforms has also increased the need for warehousing space to enhance logistics. 

While real estate investment requires substantial capital, there are easy and quick ways to raise funds. You can find one that works for you below;

1. Family, friends and colleagues

Family, friends, and close associates are the most accessible sources of funds for your real estate venture. 

You do not need any qualifications to borrow from them—no need for a credit score, debt-to-income ratio, or property condition assessment. 

They know you and your capability and can be easily convinced to fund your project.

2. Hard money lenders

Hard Money Lenders offers real estate investors short-term loans that prioritize value on collateral over credit scores for approval. Therefore, a hard money loan can be your best option if you need fast cash for a down payment to secure an investment property. 

Hard money loans are usually funded by private lenders or investor groups rather than banks, using equity or real property as collateral.

They are perfect for house flippers or developers who need to renovate properties to sell. 

3. Business partners

There are people with enough capital to invest in real estate properties but do not have the time to search for great deals.

If you have found a real estate property with good potential returns, you can find a willing business partner ready to provide the needed capital.

Meanwhile, you must prepare yourself because potential partners will have many questions before investing. 

They will likely want to know why you need them for the deal, what you intend to do with their money, and the potential returns.

4. Crowdfunding

Real estate crowdfunding is another fast way to raise funds for your real estate venture by leveraging dedicated platforms and social media. 

Crowding platforms allow you to raise large funds from many investors. The idea behind crowdfunding is to pool small contributions from many eager participants to raise larger sums for property acquisition.

5. Peer-to-Peer (P2P) loans

Peer-to-peer (P2P) lending firms match people or businesses needing loans with private lenders willing to lend them.

P2P loans are a growing trend in real estate and operate through online marketplaces. 

The approval is usually faster, and the interest is typically lower than conventional bank loans. 

Comments (2)

Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

I would add 

1. Seller paid Closing costs 

2. Buyer Agent Selling Bonus ( with Seller & Listing Agent consent) 

3. Paying TOP Dollar and Increasing Commission Amount ( with having your Brokers permission, both Sellers and Listing Agents consent ) The Seller Should be netting the same amount ( as you increase the Commission) . This should be placed in writing 

Jan 03, 2024 10:13 AM
John Pusa
Glendale, CA

Hello Tommy Wyher these are very valuable list of to raise capital for real estate investment.

Jan 03, 2024 08:09 PM