So, you want to start investing in real estate and you need to figure out how to finance things. You will actually have several different ways that you can consider. Financing real estate investments doesn’t have to be overly complicated if you understand the method that will work best for your situation. Read on to examine the ways that you can finance real estate investments.
Taking out a mortgage on an investment property is one of the most common ways to finance things. You will likely need to have a credit score of 620 or higher to make this happen. A higher credit score makes it possible to get more reasonable interest rates on your mortgage. This is a good choice for financing a real estate investment if you plan on flipping a property or renting it out to cover the mortgage payments.
There are also certain government loans that you might qualify for depending on certain circumstances. FHA loans and VA loans are government-backed and they have great interest rates. To qualify for an FHA or VA loan, you’re going to have to live in the investment property for at least 12 months, though. It can still be practical for house flippers and often appeals to those who don’t have the best credit scores.
Taking Out a Home Equity Loan
This option might be a little risky in some ways, but investors often get funds for real estate investments by taking out a home equity loan. This is a loan type that involves borrowing against the equity of your home. You might be able to get the money that you need so long as your home has enough value. The silver lining to this option is that sometimes refinancing your home can lead to a lower mortgage payment and this can make things easier to repay.
Portfolio loans are another option that you have to look into. This is mostly for seasoned investors who want to invest in multiple properties at once. If you’re thinking of investing in a block of homes, then this is the type of loan that you’ll want to try for.
Peer-to-peer (P2P) lending is a good way to get funds without having to cut through a bunch of red tape. There are P2P lending services that will connect borrowers to investors who want to profit. Many investors seek out these types of loans so it’s important to know how to market your loan request.