Looking to purchase your first investment property, but you aren’t sure how to finance the house? well in this post i will explain 6 ways in which you can finance your first (or next) investment property. I have used all of these tips and i can assure you, one of these will definitely be the right fit for you!
If you have a full time job or are even self employed, one of the best ways you can finance your first investment property is through a mortgage. This is one of the easiest ways you can finance yourself and help you purchase your property. Many banks nowadays easily give you a loan with a good interest rate. All you have to do is go to your personal neighborhood banks and let them know what amount you are looking for, how much down payment you can give, and for what purpose you are buying the property. In my personal experience i have always been approved for the loan at a great interest rate. I work a full time job, based on that they always qualify me. The only downside is, depending on the property, you will have to give a down payment and this can vary based on the market you purchase the house. An example would be that if you purchase a house for $500,000. The down payment, lets say is 20%, would be $100,000. You might not have that amount saved up so the situation differs based on the location you might purchase the property.
Personal loans are also a great way to purchase your first property. This one is different than a mortgage in a sense they are much easier to get, but the downside is the interest rate is much higher and have to be paid off much quicker. With these it is easy to get up to $100,000, and if you purchase houses in a market where property is worth $40,000-50,000, you will be easily able to still get a good cash flow to be able to pay the loan off.
I actually get a lot of questions on this specific type of financing. The reason being is this one is a little unheard of because it sounds as if why would the seller agree to this? now before i get into more details, Seller financing is when you actually make monthly payments to the seller instead. You offer him/her an interest rate at which you will give monthly payments, instead of giving the whole cash value of the house. Now the reason this one is a bit different is because buyers think that why would the seller agree to this? they would rather prefer cash, i know i would! Yes you might, but not necessarily the seller. This one you have to actually talk to the seller and see if they agree. You might have to ask around to find the right seller and deal to see if they agree, but they actually will. You just have to put the time in and ask and see if they will agree to your rates.
This is the oldest suggestion in the book which is cash. I don’t think it gets any simpler than this because you just give cold hard cash to the buyer and just collect in all the cash flow without any hassle of a mortgage or loan or anything of the sort. I personally like to do cash deals a lot since i save up a lot of my personal cash flow. Now this may not be the case for everyone, and i do know that if you get a mortgage, the tax might be better on that since you can write off the payment. Now as i always state, everyone has different preferences, this might be the right one for you, it may not. So always try to see which option is the best because what might work for me, might not work for you.
Home Equity Loan
This one personally is for home owners only. If you currently have a home, you can actually get a credit line of home equity on your property. You can use that money for anything, but typically it is used for house repairs and improvement. My parents actually use this to purchase their investment property since it helps them on their tax returns (Again, every person is different). If you do have a property ask your personal bank or other banks on how much of a home equity loan you can take out. They will usually give you around the same amount, but the rates could differ so definitely do your research before you agree to get it.
Asking Your Parents, Family members, Friends
This one is my last line of defense for you first time property buyers out there. You can always turn to your friends and family and ask them for a small loan of a million dollars (Its a joke, google it to get what i mean.) You do not have to ask all of them for a big loan, if you have an amount in mind, lets say $50,000. Ask your parents for $20,000 your brother for $20,000 and your friend for $10,000. The reason i say this is because you need only one property to start getting your cash flow in. You get that amazing deal and once you actually experience the income coming in you will find more ways to purchase more properties because you will actually get the taste of the real estate marker. This will be easily paid off because of the cash flow coming in, and what i love about real estate is that if you can’t pay it off with cash flow, you can always sell the house to earn the cash back. If possible, you could flip it or sell it for a higher price because of appreciation.
These were my 6 tips and suggestions on how to get financing for your first investment property. Whether you use these for buy and hold, like i do, or to flip them is completely up to you. All of these ways work and you just have to find if one, or all of them, are the right way for you to finance your property. If you guys have any thoughts or suggestions feel free to let me know in the comments below. I hope this post helped you guys!