Alternatives To Lender Financing


If you are just starting out, you may think that the only way to purchase property is through traditional lending options. While obtaining an investment mortgage is certainly a viable option, it is far from the only one. If you lack the credit score, down payment or income necessary to get a loan, there are still other ways you can bridge the gap and buy real estate. These options will call for you to think outside the box and possibly even step out of your comfort zone, but if you really want to get going you may have more options than you think.

It is no secret that getting a loan is much more difficult than it was in the past. Since the mortgage collapse, lending guidelines have gotten much stricter and underwriting much more stringent. There has been some light at the end of the tunnel in recent months, as new programs have begun to become available and some guidelines have loosened. Knowing that you have lending alternatives will help you walk away from a program or loan that may not be the best long term option for you.

The first option is to seek financing through a hard money lender. The idea of hard money usually comes with a negative connotation. In the past, a hard money lender was the only alternative to foreclosure or when you had nowhere else to turn. In today’s market, there are more hard money options than ever before. Hard money is simply an individual or group of individuals that will lend based on their own set of criteria. They do not follow traditional lender guidelines or requirements. Therefore, the odds of you getting approved are much higher. Even if you can get a bank loan, a hard money option in some cases is the best alternative for a given property. The rates and fees may be slightly higher than a bank, but it is still a viable way to get your business going. Between your attorney, accountant and realtor, you should be able to easily contact a hard money lender in your area.

A second option is to reach out to your friends, family, coworkers and people around you for a private money loan. You may be surprised to find out how many people close to you are sitting on money they are actively looking to invest. A quick email, letter or even a post on social media can easily attract interest. You should have an idea of the terms or fees you are interested in before you try to generate interest. Many of these people will not have an idea of how the real estate business works, so you have to be the authority and know everything about the process. It is common to show your partners double the return they would have made in the stock market or other investment options. It may be a little awkward reaching out to people close to you looking for money, but if you view this as a stepping stone and a short term problem you can find the money you need from the people around you.

If you have other properties, you may be sitting on money that you didn’t know you had. In many areas, property values have gone up over the past few years. You may have equity in your property that you didn’t even know about. Many lenders shut off home equity lines of credit or second mortgages when the market went south, but they are slowly making a way back. Instead of doing a cash out refinance, a home equity line of credit is a much better, and inexpensive, alternative. With a HELOC you can set up a line and only repay what you use. Local banks usually have the best rates and terms for HELOC’s. They should be your first call if you have equity in your property.

Another option that you have is to look at cash advances on a credit card. Playing the cash advance game can be a risky alternative, but if you know what to look for, it can be your best bet. The key is to look at cards with a zero interest balance for the first 12-24 months. If the interest rates or fees are too high, this may not make a lot of sense. However, if you have a 0 rate, you can take the money out and pay it off within the interest free period. It goes without saying, but this has to be your first repayment after you see a property from a property. This only works if you have excellent credit and your money doesn’t cost you 15% every month.

Finding money to fund your deals doesn’t have to solely rely on bank financing. These options, and many more, are on the table if you know where to look and who to ask. Networking meetings and investment clubs can also provide you with options you may never have thought of. Finding money can be a hurdle, but it is just an obstacle if you allow it to be.