Eric, let's talk about funding now. We can get some big numbers fairly quickly.
Now I have to tell you, I actually look at funding now, as fun. Because it's challenging, you can be creative, come up with a solution, and do the deal. And reach your goals, and have it be awesome. But I'll tell you initially, when I started, it meant fear to me. And it terrified me. Because I'm like, where is the money going to come from? You may feel that way right now too. And I have to tell you, if you follow the process, you're going to be in a place where the funding will work for you. It's just a part of the process. Don't let it overwhelm you. When different ideas are brought up, try it.
What kind of mindset should the newcomer have when they start to understand the process of funding their own deals?
Remember when I talked about mindset initially? And you may say, oh that won't work! Or, I don't know anybody with money. Or this won't happen. Well, you're already putting that barrier up to hold you back from success. And so when we bring up different topics to talk about funding today, I want you to really look at it with an open mind and say: how can I apply this? And try it. And you may really actually like the process.
As we mentioned in our early videos, we talked about funding as one of the main ways to maximize your income. If you can key in and focus on those low-interest rate, low-cost loans to help you maximize your returns, you're going to be sitting in a great place. So again, take the funding, and let's add the fun into it. Let's get rid of the fear part.
OK so with that out of the way, what are the best or most common ways to fund deals?
Just think openly, and you can have a conversation with me. What do you think is going on? What ways can we fund deals? Now we've talked about wholesale buyers—that's actually a way to fund a deal, by the way. Did you ever think of that? So we could fund a deal with our own cash. You may not want to, but you could easily do that. What if you did something like a home equity line of credit? If you've got low-cost interest you could use, why not? Depending on what kind of return you're going to get. Now there's a lot of different variations on how you can use partners.
You can do a joint venture, you could bring them on as a certain percent partner. It could be a debt partner or an equity partner, it just depends on what you decide. You may cross over into this world called private lenders. I think a lot of folks are scared of that, because that's your network. And that's just simply asking people around you, hey have you ever thought about being the bank in a real estate deal. And you'd be surprised at what happens when you do that. You have conventional lenders: you could go to a commercial lender, right? So are you getting the picture? There's a lot of different ways you could fund deals. You could use options to fund deals, good heavens, you could even go to the seller, and the seller could fund the deal.
What about seller refinancing?
Now, if you've ever heard of the actual funding way of purchasing a property, called subject two, that's a form of seller financing. You can definitely do that. We can do hard money, and we're going to get into a little more depth on specifically what hard money is and how to use it effectively.
There's also gap lending, which is either a portion of the actual purchase or maybe it's: you're using some equity from one property to get into another property, but we'll talk more about the details on that here in a moment.
We'll even spend a little bit of time talking about self-directed IRAs. Now the great thing about this, remember I'm not just talking about investing in real estate, like the fix and flip. I'm also talking about investing in tax liens, tax deeds. That's also real estate. The information that we shared with you can be applied in both areas, and so as part of your effective strategy as a real estate investor, you must have funding as one of your key methods of success.
What are the three most important things to focus on in this process?
Now I'm going to introduce one more thing to you before we talk about hard money. You're going to want to focus on three things to have a successful real estate business. You have to have consistent finding, finding the deals, you have to have consistently have your funding efforts and your funding ready to go, and you must be able to make your offers. As long as you're focusing on those three areas, your business will continue to move forward.
We really need to understand each funding type to have genuine success in real estate.