4 Ways to Fund a Development Project Without a Nest Egg

October 27, 2016 Marketing

In the book Rich Dad, Poor Dad, I discovered a life-changing principle:  “The poor say, ‘I can’t afford it.’ The rich say, ‘How can I afford it?”

Real estate development affords you (pun fully intended) a unique opportunity of generating money out of your creativity… without having to spontaneously come into some money beforehand.

If you’re a current or aspiring real estate developer, here are a few ways you can turn your dreams into reality, even if you’re starting from the bottom.

1. Use your home equity.

If you’ve already paid off your house, you can pull equity out of a Home Equity Loan or Home Equity Line of Credit. Both of these have fairly low interest rates, and might even contribute to tax deductions. Check out a CPA for more information on how to go about this.

2. Find hard money lenders.

Hard money lenders are people who lend money based on the value of a property. These kind of lenders tend to be conservative, but if you’re realistic about the potential value of the property, gaining support from hard money lenders can help you pay not only for development, but also for maintenance over time.

3. Find private investors.

Unlike hard money lenders, private investors usually have more money to spare, and are more willing to take risks. These investors have quite a bit of knowledge and wisdom, so if you know what you’re doing and have a well-crafted plan that you can present to investors, you’re in luck (though if you don’t know what you’re doing, or are dishonest, you won’t have a chance). Private investments tend to have an interest rate around 10% or more, which can add up over time, but it’s a great catalyst to start out. After a privately invested project succeeds, you can move on and use a different method if you choose.

4. Join a real estate crowdfunding platform.

Because of recent changes in federal laws on general solicitation of investments, it’s now easier than ever to advertise investment projects. But you don’t need to do the marketing yourself; there are already multiple platforms online solely dedicated to helping real estate developers find investors.

With real estate crowdfunding, you can gather the support of multiple different accredited investors to fund your project. This means lower risk for investors, and higher investment for developers like you.

These sites only allow accredited investors to own a share of your project, so you can rest assured your investors will follow through. You can also talk over any questions you have with the owners of the platform, who act as a liaison between investors and developers to help their transactions run smoothly.

This is by no means an exhaustive list of methods to jump-start your development projects. But my hope is that it will help you get started.

Just as every development project starts on the ground, and builds up, even your own development projects are fully doable. With creativity, determination, and wisdom, you don’t have to let a lack of money prevent you from building the future. Find a way, stay committed, and don’t give up, and soon you’ll not only have new projects built, but you can build wealth to make more projects, and maybe even invest in others.

Meg Baatz is on the marketing team at Patch of Land, a platform that’s growing out of new RE solicitation and crowdfunding laws to help fulfill RE opportunities formerly impossible with REITs, mutual funds, and traditional investment. Save time and be in control of your investment shares at PatchOfLand.com.

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