Loans help you take advantage of valuable investments, including real estate. Not everyone has the ability to buy real estate up front, so real estate investment loans make your dream of long-term wealth a reality.
You can generate passive income by renting your property, and you take advantage of a loan when it takes cash to get started. Real estate is a rewarding commodity when you consider how it can be a hedge against investment risk. Take a quick look at this guide on real estate investment loans and real estate financing.
Types of Real Estate Investment Loans
Real estate financing starts with choosing the right kind of loan. Homes, apartments, and commercial property investment will often require a down payment, and a loan can help you with this. Three types of loans to take advantage of in real estate include home equity, hard money, and bank loans.
Home Equity Loans
A home equity loan, cash-out refinance, or HELOC helps you secure a real estate investment property by borrowing up to 80% of home equity value. This is a popular method of securing real estate financing for flipping homes or long-term rentals.
HELOC allows you to borrow against equity, similar to a credit card. A cash-out refinance includes a fixed-rate but can make your existing mortgage become drawn out. Longer-term loans would usually mean that you end up paying more in interest, so this should be factored into potential returns from an investment property.
Hard Money Loans
A professional real estate investor will typically turn to a hard loan for real estate financing. It’s also considered a fix-and-flip loan, so it’s ideal for flipping houses in order to gain profits in a lump sum. This is an alternative to being a landlord that rents the property and relies on monthly income.
A hard money loan is a short-term loan that’s used to complete renovations and then put the property back on the market quickly. It’s an ideal option because it can be easier to qualify for compared to bank loans. A lender for a hard money loan will specifically focus on the profitability of the property along with income and credit.
Bank Loans
A conventional bank loan is not backed by the federal government and will rely on your credit, income, and assets. Conventional real estate financing typically includes a 20% down payment for a property purchase. Investment property, however, may include a 30% down payment.
Your credit score and history will determine your eligibility for a bank real estate investment loan. A credit check will also decide your interest rate on the mortgage. You can even take advantage of online banks and find lower fees, such as the ING home loan.
Invest In Real Estate
It’s smart to invest in real estate, and real estate investment loans give you the push to take advantage of it now. You can enjoy long-term profits from your investment, and even a second home to enjoy with your family. No matter the purpose, you can create value, and lack of funds won’t be a problem when you secure a loan.
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