Are you trying to get into real estate investing but unsure where or how to begin?
It’s pretty simple if you’re using Other People’s Money (OPM).
OPM is another way to describe your alternate financing options for your real estate investments rather than using your own money.
This article will explore accessing and using OPM for your real estate investments.
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What is OPM in real estate investing?
OPM allows investors to purchase, develop, or renovate properties using funding from other sources, such as hard money lenders.
New and seasoned real estate investors regularly use OPM to access opportunities they would not otherwise be able to access.
Why use OPM?
The main advantage of using OPM in real estate investing is to preserve your own capital while building or growing your investment portfolio.
The access to liquidity can help investors:
- Quickly seize opportunities
- Cover unexpected expenses
- Diversify their investments
- Avoid stretching their finances too thin
OPM unlocks bigger and better projects for investors, resulting in higher returns and the ability to adjust and scale your strategy easily.
Types of OPM in real estate investing
New investors may try to enter the investment world with traditional bank loans, partnerships, joint ventures, or crowdfunding.
However, hard money lending is the most effective type of OPM for a range of real estate investment scenarios.
How do hard money loans fit into the OPM strategy?
Hard money loans are a specialized source of financing that plays a starring role in OPM strategies for real estate investors.
While traditional bank loans are largely focused on an investor’s creditworthiness and income, hard money is secured by the property and has a rapid approval and funding process.
Why choose hard money over other sources of OPM?
Hard money loans are well-suited for:
- Time-sensitive opportunities
- Distressed properties
- Fix-and-flip projects
- New construction
- Commercial properties
- Less-than-perfect credit
- Irregular streams of income
This type of loan can be structured to fit the unique needs of an investment, unlike traditional lending options with rigid requirements.
It’s also the option that gives investors the most control and flexibility with their investments.
Hard money loan example scenarios
Let’s take a look at some specific examples of how real estate investors can use hard money loans as OPM:
- Fix-and-flip: An investor uses a hard money loan to purchase a distressed property, complete the renovations within three months, and sell it for a profit, all in the amount of time it would have taken for a traditional loan to get approved
- Quick land purchase: A developer beats out competitors waiting for other sources of OPM to purchase a prime piece of land for a multi-family project
- Bridge financing: An investor who needs to buy a new property before selling an existing one leverages a hard money bridge loan to purchase without delay and repays it once the other property is sold
- Auction purchase: An investor wins a distressed property at auction that requires immediate payment using a hard money loan, then renovates it and sells it for a profit
- Commercial renovation: An investor uses a hard money loan to purchase an old warehouse, convert it into loft apartments, and sell the units individually
Do any of these scenarios resonate with your needs or goals as an investor?
Marquee Funding Group can fund these deals and more. If you have a unique scenario that you don’t see represented here, just reach out to see what we can do.
How to invest in real estate using OPM
Now that you know the types of real estate investments you can access using OPM, let’s dive into how you can do it in five simple steps.
1. Choose your investment strategy
Do you want to flip houses? Hold on to a rental long-term?
Your first step to investing in real estate using OPM is to decide what you want to do with the money.
Each strategy will require a different approach to financing and managing your project.
2. Find your lender
Networking with other real estate professionals will help you find the right opportunities.
Take advantage of online platforms and communities to build genuine, long-term relationships.
Ask for referrals and review lenders to narrow down the list of those with the options and experience you need.
3. Submit your scenario
Once you find a hard money lender, you’ll need to submit your loan scenario, which includes details such as:
- Property type and address
- Property worth
- How much you need to borrow
- If it’s owner-occupied or non-owner-occupied
Hard money lenders are also interested in your investment experience, details about the project, and exit strategy.
For lenders like Marquee, honesty and transparency are key to the success of your relationship—with the hope that you can partner for numerous deals to come.
4. Secure your financing
Working closely with your hard money lender, gather all requested documentation and pay close attention to the terms and conditions of your agreement.
Be sure to ask any clarifying questions.
5. Execute your project
Marquee Funding Group can rapidly approve deals thanks to decades of experience and our common-sense approach.
We can provide funding in as fast as seven days.
Once you have your funding, keep track of your timelines and budget and maintain open communication with your lender.
When the project is completed, execute your exit strategy as planned.
Considerations for using OPM for your investments
When investors choose to use OPM for their investments, they must fully understand the obligations and responsibilities that come along with it.
Our three key tips for success:
- Perform due diligence on the property you intend to purchase
- Carefully review the loan terms and conditions
- Monitor your cash flow
These tips will help you prepare and manage your project effectively and recognize issues more quickly so they can be addressed immediately.
Access OPM with Marquee Funding Group
If your deal makes sense, we can help!
Marquee Funding Group is a tight-knit group of experienced hard money lending experts.
Each loan officer is highly trained and capable of structuring mortgage options for unique business and owner-occupied loan scenarios.
Ready to use OPM for your next investment property? Start here.