While the phrase may catch you off guard at first, the practice of using other people’s money to buy real estate in Arizona is more or less a standard practice. The biggest upside: it will allow you to buy more lucrative investments than you otherwise could when you don’t have a lot of your own capital to spend. Typically buyers think of loans as a way to finance the purchase of real estate. But, there are a handful of other options to consider including seller financing, partnerships, and short-term agreements. In this post we share the basics of gaining funding for a property purchase and How to Use Other People’s Money to Buy Real Estate in Arizona.
Please note that this article is for informational purposes, not financial or legal advice.
1) Loans
Government-backed, conventional, or private loans are common ways to use other people’s money to buy real estate in Arizona. However, you must compare the rates and fees of each and consider the repayment terms to take advantage of the best offers available. Currently, the interest rates for 30-year fixed-rate conventional loans average 6.79 to 6.85%, and the interest rates for 15-year fixed-rate conventional loans average around 6.12. Of course, these rates can vary depending on your circumstances. The requirements of each type of loan may vary greatly; however, they typically require borrowers to have a minimum credit score, a certain level of assets, and reliable income. You’ll also need your savings, with enough to make a downpayment. Additionally, if you’re looking at purchasing raw land, keep in mind that many traditional lenders are hesitant to offer that kind of loan.
2) Partnerships
Joining together a group of compatible investors, leveraging the expertise of other investors, and pooling financial resources with a shared goal and strategy is another great way to use other people’s money to buy real estate in Arizona. However, you’ll want to consider the following factors to make the best financial decisions to cover everyone involved:
- Build a great team
- Agree beforehand on how partners will handle disputes
- Get everything in writing
It’s also important that your lines of communication remain open and transparent and that you can be honest about shortcomings or mistakes. Finally, of course, you’ll need to learn more about their goals and vision for the partnership to ensure a good fit and that they have experience, a good reputation, a strong work ethic, and are financially sound.
3) Seller Financing
Sellers who are willing to finance create an excellent opportunity for you to use other people’s money to buy real estate in Arizona. In addition, these sellers provide an option for those credit issues or other states of affairs that cause them to be unable to obtain other types of loans. Sellers offering to finance are often more willing to work with buyers on the loan terms; however, they will remain in control of the property and hold ownership until the buyers have fully repaid the loan, which you must carefully consider. Remember, it is always advisable to have a professional review of the documents for any financial agreement before signing.
4) Hard Money Loans
Hard money loans are short-term loans typically used by investors who need or prefer to use other people’s money to buy real estate in Arizona. Private lenders or companies more willing to take on the risk, like buyers with credit issues or properties needing severe repairs, typically offer loans. However, hard money loans come with higher interest rates and fees, shorter repayment periods, and higher payments and risk. In addition, your hard money loan may not be subject to the same consumer protections and regulations as conventional loans. In addition, if there are issues with repaying the loan, the lender will foreclose on the property.
Professional buyers at Southwest Land Deals can help you understand all you need to know about using other people’s money to buy real estate in Arizona. We are happy to answer questions about getting started or issues holding you back without obligation; let us help you over the hurdles. Our professional buyers are seasoned local experts who want to help. Don’t forget to ask about our current inventory of the best real estate available in Arizona. Call Southwest Land Deals at 480-442-7787.