If you want to ensure that your real estate business is growing and generates revenue every year, you need to secure your capital first. And, the best way to do it is to be creative and apply for additional capital or you can even ask your family and friends to help you out. Always start small with low investment and gradually take it to the next level to achieve your goals successfully.
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No matter whether you start small or big, these seven ways can fund your real estate business:
1. Working capital loans
During the pandemic, there were many SMEs who were in urgent need of cash to cover their daily operations as they were waiting to collect their accounts receivables. If you find yourself caught in a situation like this, applying for a working capital loan can help you by easing out the entire situation. Under it, the borrower’s assets secure the debt and your operating expenses can easily be financed. For real estate, this loan will significantly add to liquidity while you wait for your sales to get completed or a lease deal to get close.
It has become very easy to avail of these loans today. Simply lookout for the financial institutions that provide easy cash against low-interest rates with an easy repayment schedule, making the entire process quick and hassle-free.
2. Private lending
Entrepreneurs have yet another great option of going for private lending. They can easily finance their projects and real estate ventures or acquisitions in this way. Private loans are mostly financed by individuals or groups of people and they do not require a lot of documentation. You also don’t need any formal approval process to get the funding, which is usually mandatory in the case of banks or other conventional fund sources. But since private lending is considered to be a bit risky, it usually offers short-term loans at high-interest rates.
3. Bridging loan.
A bridging loan is the ultimate solution if your business requires fast financial support. This is a form of a short-term loan meant for businesses or individuals, helping them at every step of their ventures like meeting their current payables and obligations. Securing the finances is usually straightforward here as your company assets can be used as collateral. As these loans are comparatively easy to acquire, they too are available at high-interest rates.
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ROBS is a great option for realtors who do not want to associate their businesses with loans or other forms of financing. The real estate business owners who have adequate savings in their IRA or 410k plan can have easy access to their retirement funds through ROBS (Rollover for Business Startups). This is not a loan on your retirement plan and as you are using it to proceed with your business, you don’t have to pay any withdrawal charges or taxes on it. Also, there are no exorbitant interest rates in the case of ROBS, which means you don’t have to stress about gathering money to repay your loan amounts. But as you are acquiring funds from your retirement plan, you might end up with lesser savings.
5. SBA financing
The government will also be helping you in times of need. Government has special fund allowances to help the start-ups in need. The U.S. government has an autonomous agency named Small Business Administration that was established back in the ‘50s. They primarily aim to bolster the economy by providing every possible support to small businesses. So the entrepreneurs who fail to qualify for bank financing can still get the funds through government micro-financing solutions. However, if you need to borrow a larger sum of money, the SBA can also help you with loans. Through this program, the SBA will be guaranteeing to repay loans to budding entrepreneurs.
Crowdfunding is a venture where companies can easily raise money through social media and other online platforms. This is an alternative fundraising drive that involves people directly pooling their money and investing in a number of ventures. This also includes real estate. The participants can pool in as less as $100 in exchange for stock, dividends, concert tickets or other rewards. In this way, investors get to invest in projects they are passionate about.
7. Consider partnerships
There are many people who are passionate about getting into the real estate business but they do not know the nitty-gritty of the same. When realtors approach such individuals to partner with them, they are delighted to finance your company. You can enter into a formal partnership agreement and look towards growing and expanding in this line of business. However, you must consult with a lawyer or an expert before getting into the partnership. They will handle your partnership documentation and other allied details, which will prevent any misunderstanding in the future.
If you are looking to grow your real estate business, there are innumerable ways to finance it and each way has its own unique pros and cons. Make sure to research well before relying on any particular method and then take the final decision.