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I was talking to a friend the other day who said he wanted to get into real estate. Some past attempts had ended badly and she had been forced to sell a house she had bought at a loss. So, since I have lots of experience in real estate I offered to partner on a deal. “Great,” She said. “I’ve got about $100,000 to invest. We would both put in equal amounts of money, right?”

Wrong! That’s not how real estate partnering normally works. One partner puts up the money and the other partner brings the skills. The profit is split 50/50. Partnerships work well when each person brings different assets to the partnership. If one person has both the money and the skills they don’t need a partner. However, if you don’t have the money or the confidence to go it alone find a partner. Fifty percent of something is better than one hundred percent of nothing!

An effective way to finance your real estate transaction is by using “hard money lenders.” These lenders make short term loans based on ‘hard’ assets not your credit worthiness. These loans are made by private lenders not banks or conventional mortgage companies. The interest is usually substantially higher than banks because they are funding deals that the bank would normally decline. Consequently, their default rates are higher than the banks.

To protect themselves, hard money-lenders base the loan amount on a low percentage of the value of the property. Usually they will lend between 60%-70% of the market value. That gives them the opportunity to sell the property quickly if the borrower defaults on the loan.

This type loan is best used on re-hab projects that you plan to fix up and sell. Another option would be to fix up a property, put a tenant in it, and try again for more traditional funding. All the while you should be working on your credit rating to make yourself a more desirable borrower.

You can find hard money lenders by checking with mortgage lenders or real estate agents in your area.  You can also type in “hard money lender” using quotation marks in a search engine like Yahoo or Google.

There are lots of ways to finance the purchase of you investment property. There are, of course, two major categories: your money or other people’s money. In this article I want to talk about using your money.

The advantage to using your own money is that you do not have to share the profits. Financing the deal yourself may be easier than you think. A small down payment may be all that is needed to get the property. If you have a decent credit score you may be able to take over the payments on the property.

There are many motivated sellers out there that are desperate to move. Some are willing to walk away from any equity they may have in the property just to prevent a foreclosure. Others may have been forced to move because of a job relocation and are now trying to support two homes.

Don’t assume that you need deep pockets or a pot of gold to invest in real estate. Don’t be too quick to look for partners or outside financing. Not having to split the proceeds when you sell or rent can make it worthwhile to be a lone ranger in your next real estate purchase.