Different Ways to Finance Your Investment Property Purchase
If you are looking to purchase your first investment property (and perhaps someday, multiple investment properties), you have to be smart with your money. There are many different ways you might finance the deal. It pays to research your options and make the decisions that will benefit you the most.
Here are 9 different ways you can finance your investment property purchase:
Of course, cash is king. It is clean and makes the buying process extremely easy. When you have cash in hand, you have a lot more flexibility and the deals can get closed very quickly.
Some fix and flip investors are able to boost their profitability using delayed financing methods. They are able to purchase properties quickly for cash, rehab the properties and then immediately finance them to recoup their expenditures. Delayed financing is not great for all investors, and how much you can borrow will depend on a number of factors. It is a good idea to consult with a lender before pursuing any delayed financing plan.
Instead of depending on the credit rating of the borrower, hard money loans are backed by the value of the property being purchased. Hard money loans can be used on a short-term basis to secure a property for a quick flip or to hold the property until longer-term financing can be established.
Private money loans are similar to hard money loans. However, these funds are generally coming from people who know the investor rather than coming from a lender. Some agreements are formal and some are very informal, which can lead to some complications later if things don’t go exactly as planned with the deal.
Portfolio lenders will offer specialized loans for investment property. They come with different income, credit and debt requirements than traditional mortgage lenders. It’s important to do your research and make smart deals with any portfolio lender or investment partner.
You may be able secure a traditional mortgage loan, home equity loan, home equity line of credit (HELOC) or refinance and cash out some of your equity to use toward the purchase of a second property. A new mortgage loan on an investment property will typically operate under different rules than a standard home loan for a primary residence. You may be able to secure better interest rates or get away with a lower down payment, so talk with your lender and see what options may be best for you.
There are different self-directed individual retirement accounts (IRAs) and 401(k) programs designed specifically for real estate investors who want to tie in their real estate investments with their retirement savings. Talk with your financial advisor about these options.
You can establish an investment partnership with fellow real estate investors, private equity investors or silent partners who can help provide financing for the real estate deals you wish to make.
Other Creative Financing Options
There are different seller financing options and creative solutions that many successful investors utilize to work with certain home sellers. You can look into lease options, seller financing plans and subject-to financing deals to find a great solution that benefits both you and the seller in the long run.
Whether you are looking to buy your first investment property or you are planning to expand your real estate portfolio, it helps to be part of a home buying network that can provide you with the analytics tools, home search resources and support you need to get the most out of your investments. This is where PropertyLark comes in. Sign up today to see if you qualify to become a member.