You have made the decision to jump into real estate investments. You have found the perfect “starter” property. Now you just have to figure out how to pay for it. Once upon a time, financial institutions passed out loans like calendars, but today the tightened credit market can make it tough to secure loans for investment properties. However, with some planning, a little creativity and a bit of good luck, such loans are within your grasp. These five tips can help ensure you obtain that all important capital.
Unfortunately there is a lot of truth to that old adage. You are going to need to put at least 20 percent down and 25 percent is even better. A second mortgage is a remote possibility but not easily attainable, and often just isn’t financially sensible.
Although many factors go into figuring the terms of a loan, the biggest factor is going to be your credit score. 740 seems to be the magic number. A lower credit score can cost you when it comes to figuring interest rates and points.
If you are a little sketchy with the down payment or you have other special circumstances that might make borrowing challenging, consider going to a neighborhood bank, rather than large nationwide financial institutions. They often can take a little more personal look at your particular situation.
You want to buy; they want to sell. You can’t get a bank loan; they don’t need all the money up front. Although in the past you would have been considered too big a risk, in today’s tight credit market, many motivated sellers are willing to consider this. It’s worth asking, but do your homework and be prepared to knowledgably negotiate down payment and terms. It is your job to sell the property owner on owner financing, and most importantly, on you.
If you're looking at a good property with a high chance of profit, consider securing investment money through home equity lines of credit, from credit cards or even from some life insurance policies. These are very risky sources of cash, so research your investment thoroughly before considering one of these options.
Financing might also be possible through private loans. Just be prepared for some very close scrutiny especially if you don't have a long history of successful real estate investments. When you're borrowing from a person rather than an entity, that person is generally going to be more conservative and more protective of giving their money to a stranger.