Lenders - Learn Your Financing Options

Lenders will be a must for you as you move forward with your investment career if you don't have all cash to pay for a property.

As you may have suspected, you have several different options for obtaining financing for a property. They are:

Mortgage Brokers/Financial Institutions - These "traditional" type of lenders are the usual way most people buy real estate. You fill out a loan application, give permission for your credit report to be run, provide substantiating documentation (i.e. paycheck stubs, bank statements and tax returns), and then find out what they will loan you at what interest rate and term.

Because you're buying investment real estate (in other words, it will not be your primary residence), most lenders at the current time will require you to put a certain amount of money down to qualify. This amount varies, anywhere from 10-30%. The upside to doing that is that you will have a smaller monthly mortgage payment than if you put nothing down, and you will have instant equity going in which can hedge against any possible decline in values.

Also, they may require a hefty amount of reserves (money set aside to cover expenses when the property is vacant or has deferred maintenance issues), sometimes as much as six months.

Obviously, if you don't have this kind of money, then you will not get approved for the loan and you will not be able to buy the property. Not good!

Money and/or Credit Partners - There will come a time in every investors life when they either don't have the credit or they don't have the money, or both, to buy an investment. Never fear, there is always someone who has what you need.

A lot of people want to invest in real estate and enjoy the monthly cash flow it brings to them, but they either do not know where to find deals, how to put together a team, or how to research and analyze investments.

Or, they may not have the time to invest, or perhaps even the desire. They just want to have the deal brought to them, finance it, and then collect the checks. You need to find these people!

If you have a lot of great deals, or a lot of time to find deals, and you already have a team in place in a profitable market, then find a partner who can supply the money, and you can continue to buy real estate.

Sometimes you may have enough money, but your credit for whatever reason isn't what a lender is looking for. In this case you can find a partner who will let you use their credit to get the loan pushed through.

Anything is possible and everything is negotiable. Each person who plays a role in the partnership - the money, the credit, the deal finder, the transaction facilitator - gets a percentage of the pie. If it's just two of you, then you may split the proceeds 50/50. Four of you 25/25/25/25. Remember, there's not set formula.

One rule to remember though. If you can do a deal without help from someone else, then don't partner up. Why take 50% of the pie when you can have 100%. But if you need help, the by all means, partnering is the way to keep your cash flow growing without stalling your investments.

Seller Financing - This is the final way you can finance a property. Many times sellers cannot sell their home and they just want to get out, so they agree to "carry back paper". All this means is that they become the bank and you make your monthly mortgage payments to them.

There are several different ways to set up these arrangements, but again, everything is negotiable from the loan amount, down payment, interest rate and term. This is a true win-win. You buy a profitable investment, and the seller not only sells their home, but collects a nice income stream for the life of the loan.

Now that you know the different MONEY players you may need on your team, the word lender should have a whole new meaning now. Happy Investing!