Nobody ever got wealthy using their own money. Seeking private investors will NOT allow you to own the property outright. In fact, the "investors" you might seek outside of traditional loans (venture capitalists) will charge much higher interest rates than a conventional loan institution (they'll want a MINIMUM return of 20%apr, or majority ownership which you will have the option to buy out at a sum of money much greater than their initial investment), so that would decrease your margin more significantly than a bank loan (and this is assuming that a venture capitalist would even be interested in financing your operation, which is unlikely given the fact that the risk/reward ratio is not very appealing for someone else's real estate investments). Real estate is such a straight-forward business model that venture capitalists don't really need to finance an "expert" to make money in a small-scale venture. If you're talking about $100mil condo building, that's obviously another story. For a small business, the only benefit to seeking financing from a private party is that the debt does not show up on your credit report, and you maintain your borrowing power from banks. The most likely source for private financing would be a friend or family member who is interested in partnering up with you.
If you are in the business, then you know that you can get "interest only" loans, which significantly reduce your monthly note. Also, you know that if you invest in rental property, most institutions will give you credit for 75-80% of the rental income as personal income, giving you greater borrowing power to turn around and buy yet another rental property, and piece by piece you are able to amass a pretty decent holding. Piecing together rental properties one at a time has worked very well for me, but sometimes I wonder if the stress of dealing with tenants is worth it (I have a demanding day job as well).
Take my 2 cents for what it's worth, and good luck.
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Originally Posted by NoSoup
I've been hunting around the net for a bit now, and I've looked at so many sites trying to convince me to pay a fee to find investors my eyes are starting to water.
Basically, I am extraordinarily interested in starting a business - specifically a business involving real estate - that would involve purchasing properties outright.
Unfortunately, I don't have the capital that I would need to purchase these properties free and clear up front, and financing them may significantly decrease the profits.
Does anyone have any idea where I would find people that are interested in an investment opportunity? Can anyone recommend specific sites that would help me find investors?
Additionally, although I understand most small business investments are inherantly risky, because I am using the funds to purchase real estate, the chances of losing money are greatly diminished, although not impossible. However, I'm certain that my years of experience in the field, in this particular area, will reduce the chances even further.
I have no idea where to begin, really.
Unfortunately, small business loans are pretty much not an option for me for two reasons. First of all, I'd prefer not to finance the property, and secondly, I likely wouldn't qualify. I have very high credit (800+ scores) but I have two factors working against me. The first is that I am paid commission only from my current full time job, the second is that I recently switched companies, so although I have been in my field for a number of years, I haven't been with my current employer all that long.
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