Financing Rental Properties
One of the biggest show stoppers for new real estate investors is due to lack of financing.
Most new investors are under the impression that the only way to get financing is through a traditional bank. Although banks can be a great resource, they are by no means the only source.
Other alternatives financing methods include:
Private Investor: There are many private investors willing to lend their money to people on "secure deals." If you find a good investment that would produce positive cash flow, you could talk with a private investor about using their funds. The downside to this is you will pay a much higher rate than through a traditional bank.
Local Banks: Most local banks are willing to work with their customers. If you have established a great relationship with your local bank or credit union, you have an increased probability of getting a loan.
National Banks: National banks are "less personal" than a local bank. But they tend to have hundreds (or thousands) of branches and more money to throw around than a local bank.
Owner Financing: Many owners who have positive equity in their homes will arrange financing directly with you. They simply carry the loan and you make the payments. The secret is to have a good real estate attorney help you draft up the contracts. Do your due diligence to make sure there are no liens against the property and have it inspected first.
Mortgage Broker: Mortgage brokers typically represent a wide variety of banks and financial institutions. They are in the business of helping people get loans. They represent people with good credit and bad credit. Finding a good mortgage broker will benefit you in the long term if you plan on purchasing multiple properties.
Here's a few key points to remember. Before you start looking for investment properties, it's important to already have approved financing. And before you attempt to get pre-approved financing, you must have your personal finances in order. So, get a copy of your credit report, pay down your credit cards and personal loans and position yourself to win.
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