Investing with Other People’s Money (OPM)

At some point in our investing journey, we will inevitably run out of money.  Investors who dream of creating generational wealth run into the realization that you can’t do it by yourself. It takes a disciplined person to enter the real estate market, investing in using other people’s money.

What is OPM?

It’s a term that refers to buying real estate property using leverage. Passive lenders inject the cash while the investor identifies investment opportunities. Getting money to invest can sometimes be an uphill task for investors. Instead of working for that cash to invest, leveraging funds can benefit both parties in terms of financial returns from the investment.

Do I Require an Investment Consultant?

Yes, apart from networking, you do a lot to help you engage with other real estate investors and private lenders. Webinars, eBooks, video courses, and books also build your knowledge of the market and types of investment options available for you. However, it is crucial to consult a licensed and experienced real estate investing coach. These coaches offer valuable insight into the current market and future projections to help you secure your investment goals.

Why Should I use OPM for Real Estate Investing?

The major reason for using OPM is due to limited cash for a new investor. An early beginning boosts your growth and that of your portfolio in the real estate market. There is also reduced exposure risk. Nonetheless, disciplined and serious individuals who build a reputation for success have long-term success.

Sources of OPM

Finding the best-suited source of OPM to invest in real estate for you is as good as understanding good debt and making it work for you.

Banks

A mortgage is the most basic OPM form where banks cover about 80% of a property’s value while you fork out the 20%. You can also obtain Fannie and Freddie debt where interest rates are low and amortized over 30 years.  They have balloon payments anywhere from five to 10 years.

Banks are often approaching with caution. Therefore, if you manage to get a loan to cover part of your investment plan’s purchasing price and execution, you are likely able to push through your capital costs and raise the property’s value.

Investors

Approaching investors looking for a good investment property gets you equity money for the property. You must come up with a solid financial structure and show the investor’s potential returns. Investors can inject cash to fund the whole project or help you raise a certain percent of the purchase price. From here, banks will cover the rest of the money required.

Operations Cash Flow

Identifying and planning to grow an underperforming property’s value can generate income to invest in other property. Banks value a property based on its Net Operating Income, not on its market value. Raising income is a major boost in value. Using this higher value to refinance, draw money from a property tax-free, and redeploy the money into another real estate property. Repeating the cycle over and over again for years exponentially boosts your wealth and portfolio. And it’s all achieved through OPM.

Private Money Lenders

Equity firms and money lenders have lower regulations, unlike banks; thus, approaching investment groups, private lender associations, angel funds, and more can land you a deal. There are tons of institutions with the sole aim of finding perfect investment property to fund. Although due diligence and caution are advised when taking this route.

Rehabilitation Credit.

The IRS (Internal Revenue Service) offers investors who rehabilitate non-residential and residential properties a credit. Reconstruction, restoration, and renovation of these properties warrant a portion of your expenses covered by the credit. Historic structures and disaster-affected property have different regulations for receiving tax credits. Therefore it is considered a good investment because you save on money.

Call to action

Armed with these tips, coupled with wit and determination, you are ready to conquer the real estate market through OPM. If you are a passive investor and you want to see how you can partner with us on an upcoming deal, schedule a call to talk with us.

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About OCI

Onyx Capital Investments, LLC is a Wyoming limited liability company seeking funds from private Investors to pool for acquisition of multiple multifamily/commercial properties in emerging markets throughout the United States, but primarily in NC and the Southeastern U.S.

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