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Investing In Real Estate Smart Move Or Not?

May 7, 2008
A real estate buyer typically borrows money from lending institutions that finance real estate investments to pay for the purchase. If the buyer chooses to pay in cash, he usually makes a down payment and mortgages to secure the remainder of the funds. It is obvious that the smaller the down payment, the greater the interest payment over the mortgage. The thing with real estate investments is that you will need a sum of money for the purchases that is very big for you to invest by yourself. This means that you will have to look for financing services to provide you with funds.

If you have made a modest down payment and have a good credit, you can ask banks to fund you after showing them your business plans. Banks will be glad to finance a part of the property costs; however, a bad credit, a poor business plan and not enough personal funds for the investment will put you at a low chance of acquiring funds from a bank. With a good credit, you can get low interest rates. A residential mortgage automatically has interest rates lower than other types of loans. Most banks will not loan out more money than the house's value, so you can talk to them for an additional loan if the property you are purchasing requires repairs. The best way to go about securing finances from banks is to do it through a mortgage broker. This ensures that you get the best rate of interest for your loan.

Getting finances from private investors is another good option if you are purchasing for profits. These private investors have a lot of liquid money. They will give you the funds for investing in the property or even do all the financing themselves. You should make sure you have a well prepared expense worksheet to show to the investors stating where money will be spent and the profits that you expect from the deal. Needless to say, the better the profits, the more likely it is that you will find a private investor who is interested.

You can also think about hard money lenders who specialize in real estate investments for financing your deal. The catch is that the interest rates are as high as 14%. The advantage is that you get your finances very quickly. Hard money lenders often lend up to 70% of the cost of the property after repairs. If you are looking for short term financing, this is your savior. Lenders often fund you in installments, and are a boon if you need a lot of cash, quick.

The seller can also finance you if he or she is not in need of cash immediately. This is done by making a mortgage contract that makes you pay the seller monthly payment in addition to a percentage rate. You can pay off the mortgage whenever you sell the property yourself.

You just need good cash flow numbers, and financing will be very easy to secure subsequently.
About the Author
John is a writer and contributor to CT Real Estate Listings and Advice and ArticlesAboutIt.com - a Free Article Reprint Site
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