Every investor should be familiar with the different ways of financing real estate deals. The main methods are traditional mortgages, hard money loans, private investor loans, partnership agreements, owner financing, and lease options.

Traditional mortgages are the way most people get the money to buy investment real estate. However, with the recent tightening of loan qualification standards and Freddie Mac’s announcement that starting in August they will reduce the total number of loans an individual investor can have from ten to four, it is important to consider other financial strategies. investor’s toolbox.

Hard money loans are typically short-term loans at relatively high interest rates. They usually come from people who are in the business of lending money. Most investors use these loans with a plan, either to change ownership or to obtain new financing in the immediate future.

Loans from private investors generally have better terms and can be used long-term for an investment property. These lenders are not in the formal business of lending money and are generally people looking for a better return on their money who, for example, may offer certificates of deposit.

Partnership deals are a great way to get around Freddie Mac’s new four-loan limit. These types of deals can be structured in many ways, but basically, a partner finances the deal, often through a traditional mortgage, and the other partner manages the property on an ongoing basis. If you’ve reached your four-loan limit, but have the time and knowledge to find great deals, then this is a great way to grow your portfolio with a partner.

Owner financing is simply asking the seller to “repossess”. The seller acts as the bank and you pay the seller regular payments on the purchase price of the property. This is another good way to get around the Freddie Mac loan limit.

Lastly, lease options give investors the opportunity to control the property without obtaining any financing. The seller of the property would give you a lease, just like a rental agreement, for a specified period of time, and you would also get an option contract that gives you the right, but not the obligation, to purchase the property at any time during the lease. In an uncertain market, this is a great way to stay active as an investor, but with limited risk, as you can always walk out at the end of the lease.

In conclusion, there are plenty of ways to keep investing, despite tougher credit conditions. As investors, we need to consider all of our options when it comes to financing new businesses.