Real estate agents like Los Angeles Real Estate exist to help buyers and sellers get the most out of their investments. One challenging thing, though, is finding finance for your investment. Here are five sources of finance available to a beginner.
1. Real Estate Partnerships
It involves finding an interested real estate investor with surplus capital to partner with you in acquiring a property. You may think of a friend, a relative, or a work colleague who is willing to inject a down payment into buying a property. Your partner must be a risk-taker who’ll take all the financial risk while ensuring that you bring in the rental revenue. Both of you must have a written agreement that spells out the profit distribution method, how to deal with losses, roles, responsibilities, etc.
2. Federal Housing Administration (FHA loan)
With the FHA arrangement, you can source a mortgage that the FHA insures. It exists to encourage and promote homeownership as the interest is manageable and reasonable. But you need to make a down payment to secure the loan. FHA is a good investment financing option for beginners.
3. Hard Money Lenders
A traditional mortgage takes about 60 days to process. Because of this, it may not be a good choice when you need to buy a property immediately. Where you find yourself with a purchase deal that you need to close without delay, you can use hard money lenders. They offer short-term, high-investment property loans that private individuals or businesses fund. The amount of the loan you’ll get depends on the property value.
Since they’re easily available, they attract high interest. But hard money lenders are suitable as a bridge to help you close a property investment before you get conventional financing.
4. Private Money Lenders
These are nonregulated lenders who’ve got extra income and are also interested in real property investment. They charge a specific interest rate and require you to pay over a particular period. A private money lender could be anyone; a friend, a family member, or a workmate. The type of finance is easy to obtain because of next to zero paperwork and restrictions.
If you think you can raise the investment property value within a short period through renovations and improvements, then a private money lender could be your choice.
5. Home Equity Loan
Banks and other financial institutions provide this type of loan. You need to have an existing property to qualify for this loan since the lender will use it as security for the loan. One benefit is that you can use your property to launch your investment into real estate. Once you have taken the loan, you must honor your payments to avoid foreclosures and losing your home and initial investment.
If you need the latest information about the number of homes resold and their average price, visit the National Association of Realtor’s Ⓡ website. Additionally, the National Association of Home Builders provides other good indicators that are useful to an investor. They include;
- Inventory- The total number of homes that are available for sale but unsold.
- Months of supply- It shows how many months it could take to sell all the homes in inventory.
- Sales Prices- The Census Bureau reports on both the median and average new home sale prices.
The Bottom Line
The key takeaway is that there are several financing ways for real estate investment. Each option depends on your needs, property value, etc. Researching to get the most out of an investment is key. For this reason, Steven Taylor Los Angeles exists to help investors make a smart choice.