money to invest

Have you ever read Rich Dad Poor Dad? Or some other book that has woken you up wanting to invest in real estate? If so, then the next thing he probably did was sit down and wonder, how do these people get the money to buy real estate?

This is a perplexing question, and one with which I identify. I bought my first investment property when I was eighteen. Eight years have passed and I am still a full-time real estate investor. However, the economy and my young age have made this a constant challenge for me.

For a few years, I bought properties with the backing of a small local credit union. If you choose this route, there are three big drawbacks. First, you must stay below the DTI guidelines as if you were living in the houses, which often ignore or discount rental income. Second, constant turnover wreaks havoc on your credit score. Third, recourse debt is leverage that can make your losses much more severe.

The best option, unless you are rich, is to use private equity partners and investors. Did you know you can convert IRAs and 401ks and use that money to buy real estate? There is no limit to the amount of money you get, and the structure of the deal is only limited by your own creativity and negotiations. However, you must ensure that you do so legally, safely, and in accordance with all applicable regulations. For example, do you need to register with the SEC? What kind of disclosures do you need to make? What should be included in your contracts? These are all questions you need to address to be successful.