The Complete Guide to Financing an Investment Property

 




Real estate is an attractive investment opportunity for investors for many reasons. It can be a hedge against market volatility when stock options remain uncertain, and various perks come with being a landlord.

It’s a smart way to generate a steady, passive income, but it does take a certain amount of cash to get started. And when you’re short on cash, taking out a loan might be the only way to finance your real estate investment.

There are various financing options when it comes to real estate loans, and each of them has its set of requirements. Choosing the wrong kind of loan can impact the success and profitability of your investment.

Know Your Options

The source of funding greatly influences your budgeting and investment strategy.

Option # 1: Conventional Loans

This is a very common source of financing, and most of you are already quite familiar with it.

Since this investment option requires the lender to take on additional risk for the borrower, the requirements for this loan are much stricter. While applying for this type of loan, expect to give a down payment of 20 to 30 percent of the property’s value.

Your credit score and credit worthiness are important deciding factors. Lenders also assess borrowers’ assets and income. Borrowers must be able to prove they are creditworthy to get the loan.

Option # 2: Fix and Flip Loans

Fix, and flip is an attractive option for investors as it allows them to make a lump sum profit with every property they sell instead of waiting for rent every month.

It’s a type of short-term loan that allows borrowers to complete renovation on a home so that it can be put on the market as soon as possible. Fix, and flip loans are hard money loans. This means the loan is secured by the property itself.

Procuring a fix and flip loan is easier than a conventional loan as the primary focus is the profitability of the investment. However, interest rates for this type of loan go as high as 18 percent.


Where to Get Financing?

Traditional Banks

Most banks offer conventional and government-backed loans.

Online Mortgage Lenders

These provide faster loans, and all the process is done electronically.

Hard Money Lenders

A hard money lender will look at what you have to offer as collateral. Although they have higher interest rates and shorter repayment windows, it’s great if you need fast money.

If you’re looking for reliable private hard money lenders, Insula Capital Group is your best bet.

The New York-based investment company has over 30 years of experience.  They provide a variety of financing options for investment properties and easy loans for investors.

Get in touch with them for more information.

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