- 1). Attract financial investors. If you do not have the cash yourself to make the purchase, you must attract the attention of financial investors who do have it. In the book titled, "Flip: How to Find, Fix and Sell Houses for Profit," by Rick Villani and and Clay Davis, the authors suggests creating an investment summary to attract investors. Assuming you have found and analyzed the investment potential of the property you wish to purchase by acquainting yourself with the neighborhood and identifying any repairs that are needed, a 1- to 2-page investment summary is an easy way to inform potential lenders of the risks and rewards of the deal. The investment summary is made up of four parts: your qualifications as an investor, the details of the property including where it is located and the size and layout of property, a cost analysis of the property including the cost of repairs, closing costs and potential resale value, and how you expect to make money of the property and when you will pay back the investor.
- 2). Borrow the money. Institutional lenders will look at your credit score, income history and down payment before issuing a loan. Obtain a copy of your credit report prior to approaching the lender and check for mistakes that may prevent you from receiving financing. If you do not have a down payment or have a poor credit score, you can turn to a private money lender. Also known as a hard money lender, private money lenders are less concerned about your financial history and more concerned with the investment. Private financing is easier to obtain if you do your homework on the potential investment, but in return for fewer regulations, expect higher interest rates when paying back the loan.
- 3). Form a partnership with an investor. Instead of a full-blown loan, forming a partnership with a financial investor is another option to finance a real estate investment. A partnership means that the financial investor has partial ownership in the property and shares in the profits and losses. The partnership agreement should define how the partners divide profits and losses. For example, in a 50-50 partnership, the financial investor supplies the funds to purchase the property and complete the repairs, but you are in charge of doing the work and making a profit on the investment either through resale value or renting it out. In this example, if the total profit is $10,000, each of the partners receives $5,000.
- 4). Ask the seller for financing. Seller financing occurs when the seller becomes the lender and you make payments directly to the seller. Convince the seller about the benefits of seller financing including profits from interest and potentially a higher selling price than they would get if the sale depended on an appraisal as it does in traditional lending. The terms of the loan, interest rate and payment plan are all negotiable and should be outlined on the real estate purchase contract.