Investing in real estate can be a great way to build wealth and secure your financial future. However, financing investment real estate can be complex and overwhelming, especially if you’re new to the market. In this blog, we’ll cover 8 things you need to know about financing investment real estate in Atlanta, and how Nance Homebuyer can help you find great deals and achieve your investment goals.
Smart investors understand that building wealth through real estate investments doesn’t always require a large amount of initial capital. However, it does necessitate a basic grasp of the diverse financing options available.
It’s crucial to weigh the advantages and disadvantages of each real estate financing method to choose the ones that align best with your unique needs and situation. Here’s a brief overview of some of the most common and beneficial ways to secure real estate financing:
Explore these popular real estate finance options:
- Traditional Mortgage Loan: Taking advantage of the current historically low interest rates, traditional mortgage financing remains a top choice. Factors to consider include credit score requirements and down payment obligations.
- Home Equity Loan (HELOC): If you possess equity in a property, you can leverage it by securing a HELOC, a versatile loan often used for various purposes, including funding a down payment.
- FHA Loan: Administered by the Federal Housing Administration, this loan type is popular among individuals with suboptimal credit scores or insufficient resources for a substantial down payment.
- Conforming Loan: This loan type requires borrowers to adhere to loan limits established by the Federal Housing Finance Agency. The baseline conforming loan limit is currently $647,200 (increased from $548k in 2021) and varies in high-cost areas.
- 203K Loan: Primarily utilized by investors looking to renovate older or distressed properties, this FHA-backed loan facilitates property rehabilitation.
- Portfolio Loan: Preferred by many buyers and investors, this loan remains with the original lender’s portfolio instead of being sold in the secondary mortgage market. Terms are often favorable, and borrowers appreciate maintaining a direct relationship with the lender.
- Lease to Buy: This agreement between a property owner and lessee allows the tenant to rent the property with an option to purchase it at a predetermined price. Some rental payments may contribute towards the purchase price.
- Cash Financing: Commonly employed by investors with available capital, either personally or through their network, who aim to buy property outright without ongoing loan obligations.
1. Understand Your Financing Options
Before financing any real estate investment, it’s important to understand your options. Some common financing options for investment real estate include traditional mortgages, hard money loans, and private money loans. Each option has its own advantages and disadvantages, so it’s important to research and compare them to find the best fit for your investment goals.
2. Consider Your Investment Strategy
Your investment strategy can also impact your financing options. For example, if you plan to flip a property quickly, a hard money loan may be a better fit than a traditional mortgage. On the other hand, if you plan to hold a property long-term, a traditional mortgage may offer more stability and lower interest rates.
3. Know Your Credit Score
Your credit score is an important factor in securing financing for investment real estate. Before applying for any loans, it’s important to know your credit score and take steps to improve it if necessary. A higher credit score can help you secure better interest rates and more favorable loan terms.
4. Determine Your Down Payment
Most lenders require a down payment for investment real estate loans. The amount of your down payment will depend on your lender and the type of loan you’re applying for. It’s important to determine your down payment amount before applying for loans so you can budget accordingly.
5. Get Pre-Approved
Getting pre-approved for a loan can help you narrow down your financing options and give you a better idea of your budget. Pre-approval also shows sellers that you’re a serious buyer and can give you an advantage in a competitive market.
6. Calculate Your Cash Flow
Calculating your cash flow is an important step in any real estate investment. Your cash flow is the difference between your rental income and your expenses, including your mortgage, property taxes, and maintenance costs. It’s important to calculate your cash flow before investing in a property to ensure it will be profitable.
7. Have a Contingency Plan
Real estate investments can be unpredictable, so it’s important to have a contingency plan in case of unexpected expenses or vacancies. Having a reserve fund or backup financing options can help you weather any challenges that may arise.
8. Seek Professional Advice
Real estate investment can be complex, and it’s important to seek professional advice before making any investment decisions. A professional real estate investor like Nance Homebuyer can help you determine the right investment strategy and financing options for your needs. Our team has years of experience in real estate investment and can help you find great deals and achieve your investment goals.
At Nance Homebuyer, we specialize in buying properties that need repairs and renovating them to sell or rent out. Our team has years of experience in investment real estate and can help you determine the right investment strategy and financing options for your needs. We work with investors to find great deals and help them achieve their investment goals.
Financing investment real estate can be complex and overwhelming, but with the right strategy and professional advice, you can achieve your investment goals and build a secure financial future. Consider your financing options, investment strategy, credit score, down payment, and cash flow, and seek professional advice from a team like Nance Homebuyer. With the right plan and a solid team, you can succeed in the real estate market and achieve your investment dreams. Give us a call today to learn more about how we can help! 770.746.8608