Raise capital for property investing
Getting started in rental property isn't all that difficult, as long as you can raise capital for property investing first. There are strategies you can use that involve as little as $1000 to get you started, or no money down at all.
At some point, though, you're going to have to raise capital for property investing, so that you can cover legal costs, conduct a renovation, or travel to see something that's available further away from home.
Whatever the reason, these ideas will help you to get started.
Eleven ways you can raise capital for property investing.
- Savings: It sounds obvious, but the best investors are also the best savers - because they couldn't really have started investing until they saved some money to invest!
- Increase your income: Offer to help your company improve their sales by thinking and acting creatively in their favour. Ask for a share of the extra profits they make as a result, or at least ask for a raise. Make it a win/win situation, so that everyone gets something that they want. Look at other jobs in your area, and see if you are being left behind in pay by similar jobs out there. Apply for some of those jobs and move to another position, or take any job offers to your employer, if you like them, and offer to let them match or beat them.
- Second job: I don't suggest you go out and work an 80 hour week, but many people take the entire income from a second job to channel into their investment while they are getting started. There are plenty of options that can be very good earners without taking too much time as well. Party plan companies such as Tupperware (which I worked for, for a time) offer good money and good incentives for the motivated demonstrator. It might even prove to be an excellent career change!
- Equity: How much of your own home do you own? If you have owned your own home for a while, you probably have a reasonable proportion of it paid down. This is called equity.Did you know that you can raise capital for property investing by accessing up to 80% of the value of your home using a loan to redraw the equity you have? Remember, also, that the value of your property may have gone up since you bought it, so you are entitled to draw down 80% of the amount you have paid off, plus 80% of the amount by which the property has increased in value! It's worth paying the money to have a valuation done for this purpose alone. If it hasn't, spending $1000-$5000 (the money from your garage sale!) on a minor facelift renovation may add $20,000-$30,000 value to your house very quickly.
- Sell Something: The average home has between $5,000-$20,000 lying around in stuff that simply isn't used. Hold a garage sale. Use eBay for the more valuable items, or if there's something really special, take it to an auction house and have it sold by professionals. If you're really serious about your need to raise capital for property investing, sell your car and buy a cheaper model. Or, sell the spare... or ride a bike! You can always put it in your plan to upgrade a bit later when your investing plans have borne fruit!
- OPM: Other People's Money - money borrowed from the bank can be used for rental property investing. There are investment loans available, or the worst case would be using your credit card (although we don't recommend it unless you KNOW the cost will be covered by what you make back!).
- Parents' Equity: Does someone in your family own their home? Would they consider helping you by redrawing some of the equity in their home to help you start property investing? Make sure that you do your maths thoroughly (of course, you'd do that anyway!) and agree to give them a portion of the proceeds of the investment so that you're not affecting their retirement plans!
- Tax: Minimise your tax by finding a good accountant. Pay less tax by offering to work as a consultant or contractor to your company, rather than as an employee, enabling you to claim more of your expenses as tax deductions. Just remember that you must earn 20% of your income from a source other than contracting, which might be shares, rental income, that second job... Use your tax return to fund investments each year. After all, it's money you didn't see in the first place. Why would you miss it if it's funnelled into generating you more cash?!
- Superannuation: Consider moving your superannuation into a self-managed super fund and use that money to purchase property investments. This is something that only recently became possible under Australian legislation. Of course, this is only money that you can access after you turn 55 or older, but it is another stream of income that will allow you to stay comfortable after you retire, and should not be overlooked in the overall scheme of your investments.
- Inheritance: There's no better way to spend the money that a loved one has left you (and saved all their lives to do so) than to respect that effort and use the money to invest and make it grow. Waiting for someone to die isn't the ideal, because you rarely know when that's going to happen. It's also kinda morbid, and you want to get started investing in rental property as soon as possible... but if you've just received an inheritance, investing it is a positive thing to do with it!
- Joint Venture: Do you have a lot of skill and time, but no money? You can raise capital for property investing by going into a joint venture (or JV) with someone who is cash-rich and time-poor. By doing this, you give your time to finding the deals, renovating or subdividing or project managing the development, and in return, take a percentage of the profit for your labour. This can be put back into future property deals of your own.
So, if you're worried that you can't raise capital for property investing, then have another good look at this list and think about the different ways you could do it.
You never know: You might be able to do nearly all of them!
Once you have raised the capital to get started, it shouldn't be too difficult for you to keep going with the profits of your first deal - as long as you do your sums and make a profit!
Then, as you build a reputation in property investing circles, raising capital for more adventurous deals can become easier, as people come to trust your judgement and skill, and look for your advice.
Just remember that to raise capital for property investing takes a little lateral thinking sometimes. Think outside the square, and you have all the tools you need at your fingertips.
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