Hello, readers. Today are exploring the options available to find a source of finance to secure a real estate investment property. Finding that finance is the first step for many people, and today we will talk about some of the ways to locate it.
1. Your personal funds and savings. Ways to raise personal finance include selling assets such as boats and cars or other items you don’t use so much anymore. This is the safest and easiest way to start, as it cuts out interest rates and the work involved in meeting the requirements of borrowed finance.
You can also consider cashing out a life insurance policy, or if you work for a company that offers an advance salary benefit, that would also be an option. Check with your HR department to check if anything is available.
Refinancing your home is also an excellent way to raise personal finance, especially if you have built up equity enough to get you started. If you are aware of maturing inheritances or trust funds coming your way, you can borrow against them. Talk to your lawyer about this option, and they may also be able to shed some light on other ways that you can raise finance.
HELOC credit is another opportunity to explore if you own your own home. The advantage of a HELOC is that it works like a credit card, so you don’t have to requalify if you require to use the funds. We can borrow money from RRSPs under the homebuyers program, and you can repay that money in 15 years. Every individual is entitled to take up to $35,000 for their RRSPs, and if you have a partner that also has funds in the scheme, you can access another 35,000 for a total of 70,000.
Another popular route to market is through the Bank of Mum and Dad. Many Canadians are finding it difficult to raise a down payment, so they ask their parents for help. It’s essential to ensure that you have the donor letter and funds transferred to your account so your mortgage broker can guarantee that you qualify for it.
2. Invest with a partner. Another way you can do this is by joining up with an investment partner. It could be your brother, your friend, or a family member. Separately, you may not have enough, but by pooling your funds, you could form a partnership to invest in real estate. You can also have silent partners, also known as Money partners, who have the money but don’t have the time to get involved in the running of the partnership. So if you can do the active part, they can provide the finance and split the profits, which would be a sweet deal.
3. Approach sellers. Depending on where they are in life and their goals, they may be able to allow you to purchase the property and secure the sale by receiving funds from you monthly. So they will get their payment for the mortgage. Depending on the deal you can negotiate with them, they will get either an additional payment or extra money into the payment for maybe one or two years. This is advantageous for many people who are retiring and that don’t have a mortgage anymore on the property. So they are not putting money out of their pockets to sustain the property. However, they would like to have the cash flow coming in. So that’s where you come in. And if that’s what they’re looking for, you might be the solution. Another option is if they’re selling the property in stages, so each year, you’re giving them money, and they don’t have to pay taxes on these all at once. They may be open to doing this deal with you. So it’s worth exploring. Talk to the seller and see if there’s anything that you can negotiate with them.
So the three sources that you can use to find the money for your next property or your first property are your own money. The second are partners, and the third is sellers. I hope this gives you some ideas of where you can start. Let me know if you have any other sources of funds for your next property.
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