HOW TO GET REAL ESTATE FINANCE AND INVESTMENT

In regard on how to get real estate finance and Investments, One would imagine that the COVID-19 pandemic would have affected real estate finance and investment. The reverse was the case, as real estate continued to be a profitable investment. In the United States of America alone, home prices rose significantly well, and this was caused by several factors on the demand side. The COVID-19 era saw the introduction of work from home as many people moved from high-cost areas to work remotely. Also, interest rate has been held steady at record lows and according to some expert in real estate like Finnie Mae, real estate is expected to remain low in the future. A lot of experts have predicted that, these trends will continue for the next several years. thereby making the potential profit of real estate investment a thing of joy.

Several factors contributed to this newest development. And if these factors will convince you to invest in real estate, then maybe you are wondering how you can finance a real estate investment. We all know that real estate is a great investment, but it comes with a steep upfront price tag. The good news is that you have different options for this.

Option 1: Finance your property with cash

This option involves paying for your property with full cash, or you can rather say paying upfront with full cash but this will depend on your resources and how wealthy you are.

Pros:

Your ability to pay upfront raises significantly your ability to purchase of real estate. This is because, it removes any financing questions or doubts in the seller’s mind. One of the advantages of paying for your real estate with cash, is that it gives you some discounts in exchange for the cash you are paying. Also paying cash will save buyers a lot of money in the interest expense that comes with private, hard-money, or conventional loans.

Cons:

This can be said to be risk versus Reward. We all know that paying in cash is a safer and more conservative approach. However, it does cap your potential gain. Let’s think about it this way, if you invest $250,000 in cash and then rent the property for $2000 per month, definitely you will see $24,000 in gross revenue per year or rather a 9.6% gross return on investment. In the other way round, if you make a $50,000 down payment after which you take 30–a 30-year mortgage at 5%, you are going to pay $977 per month in the principal interest. When you rent that property for $2000 and then subtract the mortgage payments. However, you are going to have an annual gross revenue of $12,276- nearly 25% gross returns on the initial $50,000 investment in just a year.

Generally, paying with cash certainly provides security and stability. When the risk is removed dramatically it reduces the potential reward.

Lean More: Quicken Home Equity Loan: Guide On Financing 

Option 2: Finance your property with a private individual lender.

when considering how to get real estate finance and investments,It is better to define and consider some private lenders. However, private lenders are lenders that operate outside the financial institutions. These organizations make money by lending money. This is through those who increase the value of their investment properties.

Pros:

Private lenders are more flexible than the traditional institutions. This is  to those that are lending to, and how quickly they can provide funds. When they see you as a good investment, and you will reap a host of benefits. This can be, if you don’t fit in a typical mortgage profile. for example if your credit is bad this is ideal for you.

Cons:

Here private lenders have higher interest rates than banks especially when they are taking the credit risk that the banks are unwilling to take. In addition to this you some hard work to build up a private lender network to be able to fund your effort.

Option 3: Finance your property with hard–money loans.

Most borrowers will take this option or approach with private lenders. It is referred to as a hard loan because it relies on your hard asset like property. This type of loan is in the form of a bridge loan. However, It is a short-term deal that gives you the funds until either the house will be sold or a more traditional funding stream can be secured.

Pros:

This type of loan can be secured very fast as little as seven days. This is to allow the investors, to move quickly on the property. Borrowers can easily get a hard loan to repair a house. With little upfront cost and this makes it a good option to fix and –flip investors.

Cons:

The disadvantage of a hard money loan is that the interest rate, which could be significantly very high and higher than the traditional mortgage. When you are not able to complete the repairs on time within six to eighteen months. Then you could be paying a higher interest rate, the worse is that you can walk away with nothing.

Option 4: Finance your property with conventional bank financing.

How to get a real estate finance and investments is considering conventional bank financing, and is the most common form of financing. Typically, the financial institution lends money to the borrower, based on the borrower’s credit history. This is based on his or her ability to pay off the loan shortly.

Pros:

Even though the investment property interest rate is higher, this is more than loans for your private residence. This option gives you a lower interest rate than using a private lender. Financing with banks will maximize your potential profit, based on how much cash you have available for a down payment.

Cons:

The potential problem here is risk. In a situation where there is a rental property vacancy, you have a mortgage that can chop up into your profile. Another problem is that, banks have a much longer approval process. And they have much stricter way of approving loans, than private lenders. also borrowers are limited on how many conventional mortgages they can open at a time.

Which Option is best or right for me in regard on how to get real estate finance and investments 

The answer to this depends on the situation at hand. Two primary factors can determine this for you. This is your unique financial situation and your ultimate goal for the property. In my own opinion, I would prefer to finance cash or individual private lenders. This is  because of the speed and the flexibility they provide