When, someone, decides, he’s ready, and prepared, to invest in real estate, for investment purposes, he must do his homework, and know/ understand, his options, in terms of investing in these types of properties. While investment real estate, often, is a superb investment, this is only the case, when the property is the correct one, and a well – considered, evaluation is done, and one is properly prepared, to consider the best way, to fund these purchases. The process must begin with, doing a thorough, financial analysis, and feasibility study, to consider, revenue flow, costs/ expenditures, and, whether, the purchase, makes sense. Once, this is carefully done and performed, one must consider, how he will fund the transaction. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 4 possible options, to fund commercial real estate purchases.
1. Conventional loans: Begin your analysis, and review, by considering conventional loans, and whether, this way, makes sense, for you, and your needs/ requirements! A conventional/ traditional loan, generally offered, by a bank, or other lending institution, requires significant collateral, and other assurances, to qualify. It also requires a down – payment, often, approximately, 25%. One’s overall, credit rating, must be, at a level, which will generate the finest offers, etc.
2. Get funds from contacts/ investors, etc: Sometimes, the best course, is to seek partners, or shareholders, in order to get the necessary funding. Doing so, often, reduces your personal risk, but, also limits the upper – end, possibility! In addition, it requires, putting together, a legally, drawn – up, agreement, etc. This is often, attractive, when one doesn’t have the personal funds, or can’t put together, the necessary, down – payment.
3. Combination: Sometimes, the best course of action, for someone, may be using some sort of combination, of the two methods, listed above. Perhaps, using a conventional approach, for much of the funding, and attracting investors, to, either minimize risk, or create the ability to have the necessary degree of reserves, associated with managing these types of properties, might makes sense, to some.
4. Partnership; limited partnership; corporation; Real Estate Investment Trust (REIT): If you don’t want to, or are unable to do this, on your own, a partnership, limited partnership, or corporation, might make the most sense. However, if you aren’t prepared for quality analysis of choosing the right property, or would rather, be more diversified, a Real Estate Investment Property (or, REIT), might make sense, because, if you select, the right, General Partner, and experienced, expert advisers, you will be able to invest in real estate, in a similar manner, to investing in a Mutual Fund.
If you want to invest in investment real estate, do so, wisely, and be prepared, for making the wisest, possible decisions! Understanding, financing options, etc, positions you, to make the best decision, for you!
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