TOP 5 Ways to Finance Your Investments

So, you want to invest in Commercial Real Estate, but how can you get the funds for it? Well, today Dolf will teach you his TOP 5 Ways to Fund Your Investments.

So i just found a commercial property and now i need to get funding for it oh here’s some oh here’s some more different sources of funding they come from everywhere today oops and some more today we’re going to look at the five different ways to fund your commercial real estate many people are put off the idea of investing in commercial real estate because

They have no idea where they’re going to get funding from and there are in fact many ways of getting funding for commercial real estate even if you don’t have a million dollars you can buy a multi-million dollar property we’re going to explore it today the first way is the most conventional and it’s probably the one that comes to mind most readily and that’s to

Get simply what’s called debt financing this is where you go to a conventional bank and you put in your application state your case as to why it’s a great investment they analyze it they agree with you and they lend you some money now to be sure they’ll probably lend you a lower percentage of the purchase price than a residential property will allow you to get

You might only get 50 or 60 percent of the value of a commercial property from a bank whereas on residential that might really be willing to give you 80 or 90 but even so i can show you ways where you can use that 50 or 60 percent of the valuation or appraisal to to acquire the entire property you see with commercial property the value of a commercial building

Is a multiple of its rental income technically it’s the rental income divided by the cap rate so if you can figure out a way of doubling the rental income you have doubled the value so imagine there’s a building there that you can buy for a million dollars and you don’t have the cash to buy it however if you can put a tenant in there which doubles the rental and

The value goes to 2 million and you get a 50 loan from the bank that covers your purchase price the second source of financing for commercial real estate is one you should never overlook and it’s called seller financing this is where you ask the seller or the vendor would you consider leaving some money in in fact whenever you buy a property and let me state it

Again whenever you buy a property you should always ask the seller would you consider leaving some money in chances are they going to say no they’re going to say we’re selling it because we need the money but every now and then they’ll say actually we would we wouldn’t get much in the bank anyway if we put the proceeds in the bank so they will give you the money

You need to buy the property and it ends up in your name this is great number three is what’s called equity funding for the money that you don’t have in cash and that you can’t borrow from the bank but you still don’t have enough to acquire the property you might offer someone an equity stake in the property in other words they put in the shortfall but they now

Own a percentage maybe 20 or 30 percent of the property this is a win-win for everyone because without equity funding you may not be able to buy it and with equity funding yes you don’t own it outright anymore but wouldn’t you rather own eighty percent of something that still has tremendous upside potential and you didn’t have to come up with all the money then

Owe nothing of it because you can’t afford it the fourth source of funding is to use what we call a jv partner or a joint venture partner now again you may not have all the money you need to do it you may not be able to go to a bank or you may not have the resources to get an equity funding bank to put the money in and what you can do then is go to a number of

People you know it might be friends or acquaintances and say listen i want to do this development or this investment but i don’t have all the capital are you willing to participate and very often they may say no we don’t have the money or it’s the wrong time or we’re not interested don’t bug me but occasionally someone will say yes and that’s exactly what i did

With the water skin acts that i referred to before because these water ski lakes you may recall i dug a hole 24 acres of hole in the ground but i didn’t have the money to do it so we went to a number of potential partners and explained what we were doing and one of them said wow i really like this idea i’m willing to put up some money for this and him putting

Up the money enabled all of us to go ahead with the deal and make a roaring success of it and turn a bit of stark desert into an oasis it was great the fifth source of finance is what’s known as a hard money loan it’s called hard money because it’s usually for a short term period they give you the money in cash the interest rate tends to be quite high but what

It enables you to do is to take down a building and in my case what i often do is i will either get tenants into vacant space or bring in a better tenant that pays more rent and then the value will go up and with this new higher valuation after a year or so i can go to a conventional bank and get a new loan i did this with a building that was empty and no one

Knew what to do with it but i knew that it would make a good coffee shop but i didn’t have the money in the first place to buy the building so i went to a hard money lender i told him this is what i intend to do he lent me the money i put the coffee shop in got it up and running and then got an appraiser in and the value went up so much that i could then go to a

Conventional bank to get the money as a conventional mortgage from the bank i promised you five methods of getting financing for commercial real estate and i gave you five but i want to give you a bonus because this one’s really important too it’s usually deployed in larger scale commercial properties and it’s called mezzanine financing and essentially someone puts

Up money that is like debt financing but it can convert to equity financing in other words they have the choice of converting it to an ownership stake and this is a very important component you’ll find that most large-scale commercial deals 40 50 million or more they tend to have mezzanine financing in place it’s a great benefit to both the developer of a property

Or the investor of a property and the people who are funding it because they now all have a vested interest in making sure that the entire deal goes very well i’ve given you five in fact six methods of getting funding on a commercial deal and yet from the people i speak with most of them don’t look for a deal because they think they can’t get the financing and

Here’s the secret you have to find the deal first because once you have the deal the funding will find you if you put it out there that you’ve got access to this phenomenally good deal there will be people who come out of the woodwork willing to fund it because that’s their specialty and once you do get that deal you can increase its value in myriad ways and that’s

Why we’re re-releasing this book 101 ways to massively increase the value of your real estate without spending much money make sure you secure your free copy by clicking on the link below thank you for watching i hope you learned something remember to subscribe and i’ve been in this game of real estate for about 40 years and the most frequent comment i get from

People who really want to get into commercial real estate but don’t is they don’t do so because they think it’s too difficult to get the funding so i hope at the very least you’ve learned that what you should do is find the deal first because when you find the deal the funding usually follows that is as sure as day follows night if the deal is good enough there

Are people who are willing to fund it for you and if you’re not sure whether commercials for you you might be thinking residential is really hot right now should i not get into residential i’ve just completed a video video which explores just that the relative merits of residential versus commercial and which is best for you check it out hope to see you again soon thank you so much

Transcribed from video
TOP 5 Ways to Finance Your Investments By Commercial Real Estate with Dolf de Roos