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How to Finance Your First Real Estate Investment?

You are starting your real estate investing business but you are struggling with the funds. You don’t know how you will finance your deals. Your real estate investing experience is slim to none and that is why you are afraid no one will lend you or invest in your deals.

You are facing the fear of rejection. It is because you are new and we all face fear when we are doing something for the first time. These are legit concerns but don’t be hopeless. You still can finance your deals with the below sources.

What lenders want?

If you are new to real estate investing, keep in mind that there are many sources that will finance your deals. These include private money lenders, commercial lenders, banks, and crowdfunding sources.

It does not matter what the source of funds is, remember, always treat your lending source as your investing partner. Just like you, they are also looking for an investment opportunity. They want to invest in you and expect to make a profit from it just like you do.

Private Money Lenders

You can get a private loan from a private organization or an individual. You do not need to qualify for a private loan just like banks or lending institutions require you to get a loan. It can be used for short-term financing as well as long-term financing.

These types of loans are not reported on your credit history. That is why you can get as many private loans as you want. However, private money lenders do consider having a look at your credit score before lending you money. They also want to know about the schedule because private money lenders consider exit strategy as a key factor while lending you money.

Portfolio and Commercial Lenders

Portfolio lending is the best option you have if you are looking to buy and hold a property. If you are diving into flipping properties, commercial lending is not for you. Portfolio lenders do not re-sell these loans in the secondary markets. On the other hand, conventional loans are sold to lenders who service loans.

You can build a long-term working relationship with a bank or commercial lenders as they work in the buy, hold and refinance business, this can benefit you in the long run.

Remember, commercial lenders, do go through checking a few things and see if you qualify for the loans. They will go through both your business finances and your personal finances and see if you have sufficient resources to hold the property and will most likely attach a lien to the property so that they may seize it if you failed to pay it back.

Partnering to Amplify

Because of the situation that is going on now, people are afraid of investing. The market is unstable and it is a bit risky to invest if you have little to no experience. In the beginning, a better approach is to partner with an experienced investor. Partnering with another person opens so many doors of opportunity. The opportunities multiply when you partner. On top of that, you can benefit from their credit score if yours is not so good.

Conventional Mortgage

This is a type of loan that is offered by credit unions, banks or mortgage companies. Interest rates are fixed on conventional mortgage and are higher than FHA loans.

To finance a property, the borrower need to go through an application process. In the application process, the borrower submit an application and then provide the required documents to backup the application to get the loan. The lenders runs a background check on you to find out if you can afford to pay the mortgage on the property.

You may not qualify if your DTI is more than 43%, your credit score does not exceed 650, or you don't have down payment (20% or at least 10% of the value of the property)

Hard Money Lenders

If your credit score is low and you cannot qualify for a conventional mortgage, hard money lending might be an option to go for. However, just as other financing options don't fit every deal, hard money lending works the same way. To find out whether it would work for you or not, we need to understand how hard money lending works.

As hard money lenders are conventional lenders or banks, they are not regulated in the same way as institutions are. As a result, they don't have fixed terms, fees, and procedures. The procedure, fees, terms, and rates may vary in accordance with what fits the hard money lender's investment objectives.

That being said, conduct thorough research on lenders in your area to make sure you get the loan. Find out how much is the interest rate, hard money loan points and down payment requiremend of the lender. Remember, the most important thing is "knowing your numbers". When you do know your numbers, you can clearly see how much profit an investment can make and you can explain to your lender how the deal can be a success.


Whether you are investing in a BRRRR project or a rental property. Financing the deal should not be a problem if you know where to look for finances. While considering an option, make sure you have done the math considering all costs from acquisition to holding and how it is going to impact your investment.

Multifamily Intelligence is offering you to join its exclusive membership for FREE where you can network with like-minded investors and learn from each others' experiences. You can join our Facebook group here.

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