Finding Money to Invest: 4 Places You Forgot to Look
Finding money to invest isn’t always easy; especially if you don’t already have a big savings account built up. Traditional places to find money to invest don’t always pan out. If you’re looking for solutions, consider these places you may have overlooked.
1. Local Credit Unions
Banks and other large financial institutions typically have very strict underwriting policies. If you’re a new investor or you don’t have a long history with a particular lending institution, you may find yourself being turned down for a mortgage on an investment property. This is may even be the case even if you’re currently a homeowner with a solid credit history. Banks and other lenders look for specific experience with investments, which is hard to get if you can’t get approved for a loan.
One surprising place that may come through for you is your local credit union. Credit unions also have underwriting policies, but they tend to also consider the individual instead of just looking at you like a number. If you’re not already a credit union member, consider joining one. Credit unions exist to help all the members of the credit union community, including you. In a year or so, after you’ve established yourself as a responsible person, you can apply for a loan. Chances are high that you could get approved.
2. Mom and Dad
If your mom and dad are living on retirement savings, they may be interested in helping you out with your real estate investment enterprise for a cut of the profits. Living on a fixed income is tenuous, so any method that can bring in some extra income is usually worth considering. Don’t assume that just because you’re an independent adult that you shouldn’t be asking mom and dad for help. As long as it’s a valid investment opportunity—not a handout—there’s no ethical reason why you shouldn’t at least ask.
There are several ways that mom and dad can help you make your first investment in real estate. They could co-sign a mortgage loan for you, invest with their own self-directed retirement account and share the profits with you under a business entity, gift you the money for a down payment tax-free, loan you the money you need, or advance you part of your inheritance. Any of these ways can work to help you get started as an investor as well as help mom and dad earn some extra cash. Just be sure that no matter which method you choose, you make it official. This is both for the sake of personal relationships, as well as for tax purposes. Consult with an attorney who can draw up the relevant paperwork.
3. Rich Relatives
Now that the holidays are coming around, this is the perfect time to reconnect with relatives who may be interested in doing a joint venture with you on a real estate investment. The easiest—and most understood—real estate investment would be a turnkey rental or a vacation rental property. Your rich relative could go in with you on the purchase, fronting the money that you don’t have. In return, you would split the profits equitably, according to the percentage of investment each of you made.
If you choose the holiday season to approach your rich relative, be sure to do it privately. This isn’t something you want the whole family chiming in about over the Thanksgiving dinner table. Consider it like a pitch that you would give to a venture capitalist. Find a quiet moment and explain in an objective manner why you think it’s a good investment, and why you’re capable enough to manage it. Finally, be prepared for a no answer. Don’t allow a rejection to affect your relationship. The way you respond could make your relative reconsider and say yes in the future. And, just like with mom and dad, make any lending transaction official by enlisting the help of an attorney.
4. Whole Life Insurance Policy
Whole life insurance policies accrue value over time. You pay into them monthly or annually and, upon your demise, your beneficiary receives the payout. But what whole life insurance policies don’t do is provide any sort of benefit for you and your loved ones while you’re still living. There’s a good argument for cashing out your whole life insurance policy and using the money now to enjoy a better life now. You can use the proceeds of your whole life insurance policy to invest in real estate and start getting some passive income each month to make your life—and your family’s life—a little easier. Even better, you don’t lose the value that you built up in the whole life insurance policy; you’re just moving that value to another asset, real estate. In fact, real estate appreciates much faster than any whole life insurance policy. So you’re taking money out of a low-yield investment, the insurance policy, and putting it into an appreciating, high rate of return investment, real estate. And, you can always sell the real estate property in the future if you need to. It’s definitely worth considering, right?
Before making the decision to cash out your whole life insurance policy, be sure to consider replacing it with something like a term life insurance policy. Term life insurance policies have lower premiums but they still protect your survivors’ financial situation upon your demise.
The sooner you invest in real estate, the sooner you can start the awesome wealth-building strategies you’ve been reading about on Real Estate Cowboys and other places. But of course you need to have cash to invest, right? These ideas for raising capital should help you to find the money you need to invest. When you’re ready to invest, please consider investing with us.