Real Estate Investing can Provide the Most Access to Your Money

In her article, "5 Excuses that Prevent You from Investing," Debbie Dragon reviews the main factors that prevent individuals from gaining from the buying of assets that rise in value.  The fourth excuse cited in her piece, "I don't want to tie up money" has little application to real estate investing.  When buying properties, there is more access to cash than for other asset classes.

 The first reason is that a less cash is required.  In buying stocks and bonds, at least 50% of the purchase price is required.  For collectibles, it is difficult to get any sort of loan, so count on putting down at least 50% of the contract cost.  For buying a property, it can be 5% or less for a primary residence.  A vacation home will require 20% of the price or less.  Investment properties will need 25% of the cost of the unit or less in order to get a mortgage. All of these are significantly less in terms of the cash required.  

In other words, you do not tie up your money.

After buying the property, you can access what is invested through an equity loan.  You can set this up so you receive one lump payment or establish a line-of-credit upon which to write checks.  By structuring an equity loan, you can tap into the cash value of your property immediately.  The terms for these loans are established with your lender, so your needs can be addressed.

Another way to increase the amount of money you have available is to work with a private mortgage lender.  A private mortgage is one provided by an individual investor or a group to finance real estate purchases.  Private mortgage notes are much more flexible than loans from traditional lenders such as banks, credit unions, or mortgage brokers.  Since you set up the terms of the loan with the private mortgage provider, you can arrange the loan so that it meets your needs.  This will ensure access to the cash as you wish for the loan to provide it.

The key to having access to your cash and still being able to invest in real estate is to structure the transaction so that is the end result of the deal.  Only work with lenders that will allow for mortgage terms that let you tap into your equity that is in the property, maximizing your cash flow.  What also works to your favor in having an immediate stream of cash flow is the rental income from real estate.  Not every stock pays a dividend; and no collectible provides for an income flow.  Even if a stock does pay a dividend, the average yield is just around 2%.

But the average rental income from real estate is much higher.  In addition, rental income in the United States increases about 4-5% annually.  That means your rental income will double in less than 15 years.  As to the stability of rents being paid, during The Great Recession, when stocks and bonds plunged, rental income in the United States actually rose.

Plan to have access to your cash for a real estate investment and that will be the result.  Buy the property with as little money down as possible to preserve your capital base.  A private mortgage note should be considered here as the terms are so flexible.  However the financing is arranged, construct the provisions of the mortgage so that it allows you to access your money as you need it before the real estate transaction is completed, so your money is not tied up for the future!