Investment Loans and Funding
Investors fund their real estate deals and buy investment property using variety of loan products.
Cash Real Estate Buyers
Investors who have the funds can take advantage of buying real estate with cash.
Paying cash for investment property can have some advantages. The best advantage is the ability to buy a great deal quickly. Investors who have to wait to have an investment loan processed by a lender will often lose the best deals available competing buyers who can pay cash and close fast.
Real Estate Investment Loan Products
Investors can leverage their cash by taking out a conventional mortgage loan on an investment product.
ROI is usually much higher when using a traditional mortgage loan compared to paying higher interest rates and points of other types of investment loans.
Conventional loans for investors often are limited to 75% to 80% of the purchase price, but FHA has loan products (such as the HomeStyle loan) that only requires 15% to 20% down for investors.
Hard Money Loans
Hard money loans can be a great source of funding for real estate investment transactions.
A hard money lender may loan money for both the purchase price and the renovation costs for a property in disrepair.
However, the high costs of the loans limit the use of this type of funding to either highly distressed properties in need of many repairs, or to properties that are held for a very short period of time.
Typically, many hard money loans will be limited to 65% of the after repair value (ARV).
Real estate investors with a network of connections who have money, may be able to secure a private money loan.
The terms of private money loans can be whatever is agreed to by both parties.
Self Directed IRA Funding
Investors can use their retirement accounts to fund their real estate transactions. There are a few ways of doing this (including borrowing against your retirement account).
Perhaps the most popular method of using retirement funds is to set up a self directed IRA account.
How to Set Up a Self Directed Retirement Account
If you are considering setting up a self directed retirement account to use the funds for buying investment real estate, I recommend that you consult with a financial specialist (accountant, fund manager, etc).
Please contact me if you want a referral to connect with someone in my professional network who can help you set up your self directed IRA account.