There is a lot of interest in real estate investment, especially now because of reduced rates. However, while investing can provide consistent income, tax incentives and financial security, it does not occur overnight. You must first establish a property portfolio, and to do that, you need to have access to financing. While you can look to hard money lenders or private money loans for real estate, it is necessary first to understand all the options for a first-time and experienced investor.
1. Bridge Loan
A bridge loan may be a great option if you only need funding to get through two transactions. The primary example of using such a loan is when buying one house and selling another. The credit helps to carry the purchase until the sale of the other home. Residential bridge loan lenders can offer more advice and specifics depending on your situation.
2. Home Equity Loan
Do you own an investment property or your home? A home equity loan or line of credit may be the best way for you to invest in real estate. With this loan program, a lender will appraise your property, and for the qualified investor, they will approve a loan amount or line of credit that matches the equity of your house or property. An equity loan is best for new investors or those with no liquid cash, as long as they own at least one property.
3. FHA/VA Loan
Are you a veteran, or are you interested in only investing in one property at a time? A VA or FHA loan may present the best opportunity for you. These loans through Veterans Affairs or the Federal Housing Administration offer moderate to low-income borrowers a chance to acquire mortgages with down payments of only 3.5% to 10%.
4. Investment Property Mortgage
If you want to build a property portfolio and are interested in starting with less than four properties, you can look for a more conventional mortgage option. Investment property mortgages offer new investors a way to purchase rental properties, but they often come with significant down payment requirements, typically 20% to 30%.
5. Peer-To-Peer Lending
Peer-to-peer lending provides several advantages over traditional loans. Often, an investor can borrow funds faster and with less red tape than when they apply at banks. However, as you are not applying through financially regulated institutions and are instead borrowing from other investors, you can give up certain protections and guarantees along the way, so make sure you do your research before working with a P2P lender.
6. Commercial-Residential Loan
Only experienced investors should seek a commercial-residential loan. These loan programs have faster turnarounds than others on this list, and because of the timeframe, interest rates are often much higher to benefit the lender. Therefore, experience in project management is ideal.
7. Portfolio Loans
Other options for experienced real estate investors are portfolio loans. These programs are for individuals with less than four properties at a time and those with multiple dwelling units. Because of the increased responsibility, these programs carry significant risks, which means only seasoned investors should apply.
While there are several loan options for real estate investors, few offer a quick turnaround like hard money loans. Contact a local lender to discuss the option that is best for you.