Are you looking for financing for your real estate investment? Read on to find six options that help with financing your real estate or fix and flip business.
Did you know that your money is better off in real estate than in the bank? Well, this is because borrowers could use their equity capital to purchase properties with upside and enable lenders to earn healthy returns.
Fix and flipping sure does involve a lot of expenditure and capital investment. It could get really hazy and cumbersome while hunting for financial support. There are several private money lenders and financing options which showcase attractive interest rates but don’t be carried away by their nice deals.
A circus stunt man always spreads a large net over a wide area rather than just in the area where he performs stunts. Similarly, since it takes a lot of capital to build portfolio investments, it is ideal to rely on a combination of real estate financing options to manage investment properties.
The best way for you to manage funding for flipping houses is by leveraging borrowed money wisely as it ensures better delivery than paying cash. Read on to know six real estate financing options that you can rely on.
Did you know that American mortgage has changed over time? Yes, that’s right thirty-year mortgages are relatively new. Before the great depression, mortgages had short maturity times and usually required a very high down payment. Also, they featured varying interest rates and renegotiated every year.
A conventional mortgage is ideal for acquiring fix and flip loans. If you are a rental property investor who actively buys and holds for monthly cash flow, going for a conventional mortgage is the best option. Visit your local bank or larger financial institution for conventional financing at competitive rates. Hey, don’t forget to keep tabs on your credit score as it is the determining factor obtaining loans.
Get in touch with fix and flip hard money lenders who provide short-term loans that help you finance fix and flip deals to quickly get your money back and repay the loan. You can also bridge the gap between investment property purchase and longer-term financing.
Hard money loans carry higher interest rates than other options, and the eligibility is less stringent than institutional financing. Make it a point to study the loan guidelines set by fix and flip hard money lenders thoroughly before availing the loan.
SDIRA is the best option for finding funding for flipping houses as it is a special type of IRA account that lets you invest in a wide range of investments beyond typical stocks and bonds. Invest in retirement-qualified savings into real estate, and other alternative investments.
Don’t hesitate to go for SIDRA if you have a sizable IRA and abide by the rules as it is one of the best sources of funding. Use SDIRA through a non-recourse loan as this loan uses just the property as collateral rather than your creditworthiness.
Did you know that some sellers may finance for you if they own the property? That’s right; this allows you to make payments to them instead of a private money lender or a bank. However, if the seller has a mortgage on the property, you need to repay the loan in full before the title changes hands unless a clause that you can assume their loan.
Since every house is unique, make sure to repay the mortgage in instalments. Unlike financial institutions and money lenders, seller/owner financing lets you negotiate the interest rate, downpayment, and length of the loan. It sure does sound like a great deal.
Did you know that you can get fix and flip loans for your real estate business from life insurance companies? Yes, that’s right, a life insurance loan lets you borrow against the policy’s value if you have a permanent or whole life policy.
So, what about the collateral? Insurance firms use the policy as collateral for the loan. Most insurance firms would allow you to borrow loans up to 90% of your policy value, but this number entirely depends on the firm’s norms. It is ideal to borrow against the cash in the whole life policy to fund your property.
Did you know that availing life insurance loans enables you to obtain funds quickly as you don’t have to qualify for the underwriting process? Better yet there would be no effect on your debt-to-equity ratio as the amount borrowed doesn’t show up in your credit report. Since interest accrues each month, there is no need to follow a strict repayment schedule. With competitive interest rates, going for a life insurance loan is one of the best options for real estate financing.
Have you ever contributed to a business with your investment and shared profits among your fellow investors? Well, this is what crowdfunding is; it allows you to get small amounts of capital from many investors. You can start by visiting some renown real estate crowdfunding platforms such as Patch of Land, Roofstock, Lending Home and Fund that Flip. Use these platforms to build a rapport with investors as most crowdfunding platforms offer to finance experienced or trusted investors.
Weigh your options carefully and make decisions while choosing a real-estate financing option. Your best bet is to contact financial advisers for clear, unbiased advice on what financing option to choose according to your nature of the investment. Most advisers provide the first session free of cost and charge in the subsequent sessions. If there are any costs, the adviser must inform in advance.
Don’t be worried about the fee as some advisers will charge a fee for arranging the mortgage whereas others are paid by the lender. Keep an eye out and check whether the financial adviser you are consulting is registered with the financial conduct authority.
It is natural for fix and flippers to fret about managing financing, but these six options will help you narrow down your search better. Also, communicating with lenders, investors, and showcasing project files would become challenging in the long run.
One of the best ways to get in touch with investors and connect with crowdfunding platforms for financing is via Mast. Mast is a robust communication platform that not only helps you connect with investors but also provides a platform to showcase your projects, and monitor investment.