The housing market crash of 2008 has become a distant memory, and home values are rising again. The strong economy has also attracted investors who want to make real estate a part of their investment portfolio. By understanding what is LendInvest Loan Engine, it can’t be hard enough to find the perfect investment property. But the question is, how would you finance it? A little creativity and preparation can bring financing within reach for many real estate investors by considering the following tips.
Make a Significant Down Payment
Because mortgage insurance does not cover investment property, you will need to pay at least 20% down to get traditional financing from lenders. If you can afford to pay 25 percent, you may be eligible for a lower interest rate. A larger down payment allows you to “more skin in a game” and has more potential for loss if your investment fails. It can be an effective incentive.
The bank also has greater protection against losing its investment if it receives a larger down payment. You can lose your entire stake if the investment does not go well before the bank starts losing any money on the property. Even if you do not have the down payment funds, you may be able to apply for a second mortgage, though it is likely to be an uphill process.
Consider a Local Banker or Broker
If your down payment is not quite as big, you can consider a smaller bank to finance your down payment or other extenuating circumstances. After all, banks have financial flexibility. They may also have a better understanding of the local market and could be more interested in local investments. A mortgage broker is another option. They have access to many loan options, but you must do your research before choosing one. As experts recommended, remember to check their background, their educational attainment, and if they are members in good standing of professional associations.
Ask for Owner Financing
Back in the days when almost everyone could get a bank loan, a request for owner financing was used to make sellers suspicious of potential buyers. Because credit standards have improved and credit has become more difficult, it is now acceptable. However, you should still have a plan in place before you pursue it. You need to say: “I would like to do owner financing with this amount of money and these terms.” You must sell the seller on owner financing, as well as on you.
The game plan shows the seller that you are serious about the transaction and that you are ready to make a real deal based on the practical assumptions that you have presented.
Think Creatively
Realtors suggest that you can finance a down payment or renovation with a home equity loan. It can be done from your credit cards or via life insurance policies. The financing for the actual property purchase might be possible via a private personal loan through peer-to-peer lending websites like Prosper and LendingClub that connect investors with the individual lender. You may face some skepticism if you don’t have a track record of success with real estate investments. Peer-to-peer groups often require that you have a certain credit history. Experts stated that borrowing from a person rather than an entity will generally result in a more conservative person who is less likely to lend money to strangers.