Investing in real estate can be a profitable venture for many investors, assuming the capital can be raised to purchase a rental property. If you think real estate investing is the right choice for you, but financing your property is preventing you from jumping in, here are a few options to help you make the leap.
1. Down Payments
For many investors having difficulty obtaining a mortgage or other loan for a rental property, or if you’ve been offered interest rates that are too high to make the venture profitable, consider a larger down payment. At least 25 percent should help cut the interest rate considerably, and 50 percent can open the door to many other types of financing. Of course, this may also mean delaying your purchase while you save up the cash, but it may be worth it to be in a more favorable position.
2. Online Lenders
Local banks and credit unions can be excellent options for financing your real estate investment, especially if you already have a great relationship and history with an organization. However, these are not the only options available. So, if you’ve been unable to obtain financing through local lenders, try online loan marketplaces such as Quicken Loans or Rocket Mortgage. These options also allow you to apply to several lenders without the hassle of several trips to the bank.
3. Look for Investors
Owning a rental property yourself may be the ultimate goal, but working with several other investors may help you get started while also easing your personal risk. If you can find several investors, you may collectively be able to purchase a property without a loan, which will allow you to move on to the profitable part of the venture sooner. Once you’ve got a positive cash flow on that property, you can work on obtaining property of your own.
4. Seller Financing
If loans and investors are not working out for you, one final option is to see if the seller is willing to be the financier. This option typically only works if the current property is owned free and clear with no mortgages or liens against the property. That way, the seller can take monthly payments from you until the property is paid or until you can secure financing for the remaining balance. If you’re considering this route, make sure you go in with a plan as most sellers will want to know what terms you’re seeking and what their legal protections will be should you default on your payments.
Choosing What’s Right for You
How you finance your investment ultimately comes down to your current credit situation, how much cash you have on-hand to invest, and how quickly you are trying to get in the game. If you have time, waiting to save a significant down payment may be the best way to obtain financing on your own through conventional methods. If not, these alternate options should help you get started sooner so you can begin managing your rental property and drawing profits faster.