how to finance investment properties?

Question

What are some of the best ways to finance investment properties?

Answer 1

Depends on what you are interested in doing. If you are looking to rehab to flip then go to www.rehabfunding.com They will loan up to 65% of the after repair value (ARV) but generally require a credit score of 620 or better. If the purchase price and repair cost of the property is less than the 65% you can borrow 100% of the cost. You have to know and understand your market area. I have used them quite often and recommend them highly.

Most lending sources limit the number of loans you can have out as well as the property size. For instance, multi family loans with 90-95% LTV (loan to value) may be limited to 4 units. I stick to single family ugly ducklings in nice stable neighborhoods.

Anything over 4 units is considered a commercial loan and those seldom go for more than 80% ltv which means you would have to come up with 20% down.

The alternative is private investors. Some states limit the number of investors to 5 or less. Anything over five and you may come under the securities laws which requires filing reports with the SEC. Each state is different. Some states will also not let You advertise for investors without first having a property under contract or unless you are a licensed loan originator.

Basically, you invite investors (family, friend, lawyers and doctors etc.) who have money to invest. You can increase the number of potential investor pool by appealing to retirees who have money in low yielding retirement portfolios but that may require them to transfer the funds to a self directed IRA/401K before proceeding. There are special rules that must be followed.

You can offer them 10-12% which is more than they will get at a bank plus a security interest in the property. I know one gentleman who offers 10% interest if the investor wants monthly payments and 15% interest if they will wait until the property is sold. Each gets a mortgage note in the order that they came in so that there are generally 4 or 5 liens on the properties he buys.

Most take the 15% and wait so that my friend generally controls property with no monthly mortgages to contend with. He then does the necessary rehab and flips the property taking his share with little or no risk.

I also recommend www.uslandco. com THere are lots of articles on anything real estate. It is a free site with courses, real estate forms, etc. but of course they frequently offer to sell you things.

Answer 2

a classic case is outsourcing the funding requirements to a second party whose terms are lower than the premium or appreciation in value the property will achieve - in other words so you make a profit using other people's money.
for overseas property investment there are a number of options that make the concept of funding through lending houses (banks/building societies) very attractive. as i'm not clear on what part of the world the question applies to. US developers and investors are increasingly looking out-of-country for flexible and more profitable realty investment opportunities.

Answer 3

depending on how much money you have down, you can get what are called hard money loans. generally they have higher interest rates. but they can make loans banks can't. hard money is usually investment groups or private investors. a local lending company should be able to help you out.