Your family might be struggling to generate investment wealth, or you might have plenty of it and are looking for somewhere to invest it other than stocks and bonds. There are several alternative asset classes you can look at, but real estate is usually a good choice when taking your first step past the stock market.
When a whole family pulls together, they will have more resources and potential talent to work with. That can make something like real estate easier to get into, but you still need to know how your family can secure financing for your real-estate business.
Financing Real Estate
There are many ways you can finance your real estate efforts. Entrepreneur lists some of the top ones your family might want to consider.
- Use the Family Savings: This might be a risk, but it does mean you might avoid accumulating debt.
- Get a Business Loan: Community banks and credit unions might be sources of business loans that either start or grow your venture. Small Business Administration loans through the federal SBA might be another option.
- A Business Line of Credit: This would be similar to a loan except that you would only tap into it as needed instead of borrowing a set amount all at once.
- Liquidate Assets of Value: From investments and vehicles to jewelry and antiques, your family might own things that can fund real estate deals.
- Borrow Your Own Money: You can sometimes take a loan against your own 401(k) or even a home equity loan.
- Find a Financing Partner: Someone in a complementary business, perhaps a mortgage broker, might be someone who can chip in and benefit from your family’s real estate business.
- Have Friends Help Out: If your collective financial assets as a family aren’t enough, consider whether or not any family friends you trust might be willing to join in on the fun.
- Keep Your Day Jobs: No matter how much money your family hopes to make from real estate, everyone should maintain their regular employment income for now.
Invest With Sweat Equity
One kind of financing that your family real-estate business might benefit from is fix-n-flip loans. The concept behind this isn’t hard to grasp, as you’ve likely seen plenty of TV shows centered around investors buying properties in poor condition and then fixing them up to be something desirable so they sell for considerably more than they paid for them. Many of these homes or properties were stories of abandonment, foreclosure, or other situations where the building in question is possibly in the worst condition on its block.
The process of making money off of something you’re trying to flip is simple, but it’s not always easy. You have to ascertain the condition of the property and find the specific issues that have to be addressed to keep up to the code and safety regulations. Then, you need to identify the particular upgrades that likely buyers would be looking for in the area.
These upgrades need to happen as quickly as possible. Even if you pay contractors to do all the manual labor, you’ll still put in quite a bit of work handling all the details. The sooner you can sell the property, the more you can make.
Real Estate In The Age Of Inflation
Indicators seem to suggest that inflation might have peaked and will start coming down. However, it’s also likely to be a prevalent economic factor for some time to come. That means your family’s real estate planning needs to take into consideration.
Does inflation impact real estate? It’s actually inevitable. Does it have a positive or negative influence? It works both ways as it turns out.
The good news is that if you’re smart with your real estate investments, you should be okay. As long as you have real estate investments that generate cash flow, then your properties are assets that can help you during all of this. Inflation helps drive up property values most of the time, and that helps you make money. That helps you out anytime you sell.
If you’re not selling anytime soon, then you probably rent out your properties. Inflation causes rents to rise in most cases, so that’s another opportunity where real estate can make you more money in an economy like this. For that matter, inflation drives down the value of the dollar, and that can make your existing debt cheaper over time.
One downside is that rising property values can make it harder to invest in new pieces of real estate. The ones you hold right now are likely to go up in value, but getting into something fresh is going to mean getting over a bigger hurdle than previously.
Also, fixing up properties might take more time and money. Supply chain issues and prices for raw materials can make it harder to get the supplies you or your contractors need. Also, labor shortages mean it might take more time to get the personnel you need.
There are obviously risks and benefits associated with inflation and real estate. Then again, any investment opportunity is always going to be a mix of both. Real estate is still a good bet when you do things right.
Always In Demand
You don’t have to know much about real estate to know that prices can go up and down. However, they tend to go up in the long run despite occasional market downturns. Those just don’t last forever.
The fundamentals are just too strong. Physical land is one commodity not being made anymore, and supply chain issues and labor shortages mean that homes and buildings aren’t being built as often as they used to get put up. With a population that grows nearly every year, the current demand for real estate is going to keep growing.