Skipping the Middle People in Real Estate Investing
Let’s start this idea with an analysis of the benefits of real estate investment, as well as how it’s funded in most cases. First we’ll take a look at the needs of the real estate investor, and then we’ll look at the disgruntled saver who has CDs, savings accounts, or poorly performing stocks and bonds in their investment portfolio.
The Real Estate Investor The active and knowledgeable real estate investor has their choice of several investment strategies and some use more than one. Here’s a quick overview of each of the most common and their funding needs:
- Long term rental mortgage: This isn’t usually something a passive investor will be involved in, as long term mortgages are usually obtainable from major traditional lenders. However, it doesn’t mean that a passive financial investment can’t be the source of a mortgage.
- Wholesaling investor purchase-to-sale: This is a short term funding requirement requiring money to purchase the property and fund the closing until the sale closing, usually the same or next day, pays off this loan and rolls the property to the investor or retail buyer with new financing.
- Fix & flip investing: This is also a need for short term financing, but for more than just the purchase price of a property. The rehab must also be funded. There is a niche, transactional lending, that meets these needs, but with a high cost. There is room here for a sharp private money lender who wants to remain passive but wants a high return over a short time with manageable risk.
The Disgruntled Saver
Now we go to someone who may go their entire life and never meet an active real estate investor in a transaction. They’re conservative savers who have built a nest egg and have it safely tucked away in savings accounts or certificates of deposit. They may also be investing in stocks and bonds, but they’re not excited at all about their overall returns. They would love to find a relatively low risk way to get higher returns.
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