Real Estate Investments – 4 Common Ways to Raise Finance in the Real Estate Business

There are different types of financial institutions available in the market. These include commercial banks, insurance companies, credit unions, brokers, investment banks and venture capitalists. The method and repayment plans of each of these institutions vary accordingly so it is up to you to decide which one to adopt as best suited to your requirements.Financing from banks This is the most common form of raising finance, in this method the bank gives you a loan and then you have to repay the loan in a given amount of time with interest. Usually commercial banks are the ones able to offer you the highest amount of loans but these banks have a very strict policy on who qualifies for their loans therefore resulting in big time delays due to which by the time you get the loan the seller may already have sold the property to someone else also in the current economic climate more and more banks are refusing loans to potential customers due to the increased risk of bad debts.Venture capitalists Venture capitalists are people who invest in a business and provide capital for start up or expansion. They are professional investors who manage funds for the sole aim to invest it in whichever business they feel offer the highest returns. Venture capitalists normally charge higher rates of return than traditional institutions, it can be as high as 25 percent the venture capitalist may have no business experience applicable to the industry your company is involved in, and is focused on the potential rate of return your company can provide.Equity loans This is another frequently used financing option. Equity loans are loans that you have secured by the equity that you have built up in your homes (equity is the difference between the property’s market value and the amount that you owe on it). These types of loans are generally offered to people who have a good credit history and rating. Normally such loans are carried out by the owner of the property to either repay the previous mortgage or to raise finance to fund a new investment opportunity. These kinds of loans have low interest rates as the banks keep your property as collateral (an option in which if the person defaults then the bank can foreclose the property).Bridge LoansThis financing technique is usually used by those sellers who want to buy a new property before selling an already owned property but they need the required finance to come from the property that they already own. These types of loans are mostly used in seller markets. These loans are approved fairly quickly by the bank as they do not take a long duration to repay also in such types of loans the banks usually charge a higher rate of interest then in traditional modes of financing.