There is never a bad time to invest in real estate. A real estate investment, especially real estate, means that you will have a constant income that will continue even after retirement. In addition to the rental income, your property will be appreciated if you decide to resell it years later.
The truth is that few Americans can afford to buy an investment property with direct financing.
Fortunately, you don’t need to have a lot of money to own an investment property, as there are plenty of other financial options out there.
Here are different types of financing you might consider.
hard money lenders
Hard money lenders are private lenders, usually high-value individuals or companies, who finance real estate investors for a profit on borrowed money. While hard money lenders are primarily used to finance, repair and return types of property, you can still use this option to finance your investment property under certain circumstances.
The advantage of hard money lenders is that their approval requirements are less stringent than conventional loans, which means you can take advantage of an urgent opportunity.
The main disadvantages of hard money are that execution times are short; typically, a few months to a year, and interest can be significantly higher than conventional loans.
You can get help finding money lenders near you on this page on the HardMoneyHome.com website.
Many investment property investors prefer conventional loans, and for good reason. Conventional mortgages have extended repayment periods that are easy to manage.
However, financial institutions offering this option may require borrowers to have a good credit rating, and loan approvals can take days. In other words, you risk losing urgent offers. But if you can qualify for a conventional mortgage, it’s one of the best ways to finance an investment property.
Home Equity Loans
If you have other properties in your name, home equity loans are a great option for you. Many financial institutions typically offer home equity loans and have pre-set interest rates and payment periods. In this type of financing, the lender uses the borrower’s existing properties as collateral.
Typically, a borrower can borrow up to 80% of the value of existing properties under this option. Home equity loans also allow borrowers to obtain money for any other reason other than real estate, as long as they make fixed deposits each month.
Seller financing is one of the lesser known home financing options. As its name suggests, financing is provided by the seller of the property.
However, this does not involve monetary financing per se. Instead, the seller and buyer enter into a contractual-like agreement to agree on the number of monthly payments, repayment schedule, and interest.
The agreement also specifies the repercussions in the event of default.
This option is only possible if the seller has full ownership of the property and has no outstanding mortgage payments, which can be rare to find.
Pension fund loans
While retirement funds are for golden years, borrowing to invest in a good cause is a good idea.
Many pension funds allow members to borrow from their pension funds, with the limit often being $50,000. The good side of this investment option is that you can always have your retirement secured by your investment.
Additionally, you can use the returns you get from your investment to maintain your retirement fund loan, which means you still receive your retirement funds when you retire. The downside of this option is the limitation on the level of funding you can access.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended for use by users in making (or refraining from making) investment decisions. Appropriate independent advice should be obtained before making such a decision. London Loves Business takes no responsibility for winnings or losses.