How to Get Financing for Your Real Estate Investment Properties
If you are new to real estate investing, you might find it challenging to secure funding. Most people do not have the capital on hand to purchase a property or to undertake all of the repairs alone. This doesn’t change that the fix and flip strategy is a good one to follow or that many flippers and investors swear by it. As the popularity of the strategy grows, so do the options for financing.
Here are some of the options you may find for your real estate investments.
Private Money Loan
A private loan comes from people who have the cash and want to invest in a project. Often, these types of lenders will offer better rates and more flexible terms than a bank. You may find these financing options from friends, family or business partners. You can expect private lenders to be willing to loan more, not to mention, accept a lower credit score.
Bank loans are more traditional in terms of financing for a real estate investment. Now, the qualifications are higher with bank loans, so in some instances, funding an investment property is more of a challenge. Often you have to make a large down payment and have a strong credit score. Now, if you’re serious about bank funding, local banks may work with you more closely than national institutions.
Peer to Peer Lending
Peer to peer lending is a bit of a new opportunity. Investors and developers come together online and enlarge the pool of potential lenders. This type of real estate funding is beneficial because it makes investing less expensive.
Hard Money Lending
A hard money loan is asset based. This means that you secure the loan by real property. The issuer of the loan bases the amount on the value of the property instead of on the borrower’s credit score. The problem with this type of financing is that the rates are often higher.
If you’re ready to make a real estate investment, then you do need to think about how you are going to finance it. Most people cannot afford to invest in a property by themselves. This is why there are so many different options to receive financing for real estate. The type of financing that you choose, of course, is going to be heavily dependent on your situation. Those with higher credit and more money to lay down will have more options.