Navigating the Maze of Investment Property Financing Strategies
Investing in real estate can be a great business move. However, when you are first starting out, you might find that you don’t have the necessary funding. Luckily, there are several investment property financing strategies that you can use.
Consider each of these options to determine if any of them are right for you.
Getting a Bank Loan
A common and obvious choice is to get a loan from a bank. If you qualify for the loan, you will agree to make payments each month over a set period of time. Many banks, however, require a down payment for 20 percent of the value of the property. If you cannot provide this, a different strategy might be better for you.
Borrowing From a Private Money Lender
With this strategy, you are borrowing money from someone that you know. If you have friends or family that have some extra cash, this can help you get started. It is still a good idea to sign some kind of agreement and it is worth considering if the arrangement might affect your relationship with the lender.
Borrowing From a Hard Money Lender
When you borrow from this kind of lender, there are more formal procedures to follow. These people lend money professionally and will likely have requirements that you must fulfill to qualify for the loan.
Using Seller Financing
If you are purchasing a rental property, this investment property strategy might be a good one to consider. Instead of paying the full amount for the property, you will pay the seller in monthly payments. This will include interest but can save you the trouble of having to get a loan.
Working With a Mortgage Broker
Sometimes, finding a source of funding can be more difficult than anticipated. If this is the case, using a mortgage broker can help. It will cost you more money since the broker will collect a commission, but this can be an easier way to find a lender that is right for you.
Finding a Real Estate Partner
If taking out a loan doesn’t appeal to you, one alternative is to find yourself a business partner. If you have a good plan and can find someone to invest in it, you can get the needed financial support without worrying about monthly payments.
When you need help finding funding for your investment property, you should consider each of the options carefully. Choose the one that best suits your needs, and be sure to keep in mind your ability to pay back any loans.