Not every real estate investor is able to cover all the closing costs and buy an investment property with cash. In most cases, the real estate investor will need a loan. However, in the real estate market 2018, there are plenty of ways of financing investment property. Yet, depending on the investment strategy as well as the financial situation, the investor should be familiar with real estate investment loans. Consequently, we will explore the best real estate investment loans in the real estate market 2018!
#1 Real Estate Investment Loans: Hard Money Loans
A real estate investor can apply for hard money loans even if his/her credit history is not so positive. Hard money lenders in most cases are businesses or professionals who lend money only for one purpose, to support real estate business. Hard money loans are a great investment property financing option as the process of receiving money is fast. Additionally, in most cases, hard money lenders do not ask for a down payment. So if you are wondering “How to buy rental property with no money down?” hard money loans are the answer. Further, the amount of loan is based on the investment property’s after repair value. Moreover, if the real estate investor has strong negotiation skills, he/she might soften the requirements. In other words, hard money loans might be flexible.
However, there is one con. Typically, hard money loans are short term loans, meaning that the loan period is a maximum of 36 months. Consequently, just any investment strategy will not be a good idea, as the investor may end up in financial trouble. Therefore, do plenty of research when choosing hard money real estate investment loans!
#2 Real Estate Investment Loans: Private Money Loans
If the real estate investor has the opportunity to apply for private money loans, he/she should choose this investment property financing method. Typically, private money loans come from close friends or relatives, meaning that there will not be high interest rates. Still, not paying back such real estate investment loans on time might ruin the relationship between friends or relatives. So, be careful when promising to return the money on a certain date!
Additionally, private money loans may come from real estate investors who have extra money and are ready and willing to invest in your business idea. Yet, for their “help”, they expect a certain return on investment. The process of finding such lenders depends strictly on your real estate investment network.
#3 Real Estate Investment Loans: FHA Loans
Federal Housing Administration loans (FHA loans) are the loans that the government is issuing for those buyers who have low income or bad credit history. The great part about FHA loans is that the down payment might reach only 3.5%. Moreover, in certain circumstances, the down payment might be issued as a gift. Thanks to this financing investment property method, nearly everyone is able to buy a home. Yet, the investor should be well introduced to the rules when applying for FHA real estate investment loans. First of all, the investment property should be owner occupied. Second of all, your application for FHA loans will not be approved if you plan on financing a rental property. The only possible solution to get the loan and make money is by investing in multi family properties up to four units, such as a duplex, for instance.
#4 Real Estate Investment Loans: Conventional Mortgage Loan
One of the most common ways to get a mortgage for rental property or other types of real estate investment is actually by finding conventional mortgage lenders. Such mortgage lenders are usually banks (local and national). The mortgage loan requirements will vary depending on the investor’s needs, such as a mortgage for rental property or primary residence, for instance. Everyone can apply, yet, many conventional mortgage lenders require a good credit history. A good score typically means the investor should have a 600+ credit result. Additionally, to get such investment property financing support, the investor should put at least a 20% down payment. Yet, the advantage of conventional mortgage loans is that the interest rate is typically lower when compared to other options of financing investment property. Consequently, let’s explore separately the investment property mortgage rates as well as answer the question: “Can I remortgage my house to buy another?”
Can I Remortgage My House to Buy Another?
Let’s talk about remortgaging in general. Remortgaging typically is a process of transferring the mortgage from one mortgage lender to another. Consequently, this does not involve taking a second mortgage when financing rental property. Reasons for remortgaging might be different. For example, the investor might want to reduce the monthly mortgage payments. So, if your goal is making money in real estate and not paying extra for something that you can avoid, then the answer is YES to the question: “Can I remortgage my house to buy another?”
What Are the Investment Property Mortgage Rates in the Real Estate Market 2018?
Usually, investment property mortgage rates remain stable through the years. However, for the last four and a half years, the mortgage rates stayed below 4.58%. It is important to state that the mortgage rates that were predicted by many major agencies have already exceeded the forecasts. National Association of Realtors and Mortgage Bankers Association have estimated a range of 4.5%-4.9%. Therefore, it is possible to state that mortgage rates are only increasing.
Investment property mortgage rates will continue to grow as it was already stated. However, real estate investors will continue buying and selling investment properties. Especially when buying investment properties, many will turn to various real estate investment loans. Depending on your investment strategy, certain real estate investment loans will be a perfect match.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.