Before deciding whether to invest and what property to invest in, it is important to know how you are going to finance your investment. The method you use to finance your real estate ventures ultimately determines your net return.
Here are four ways you can finance your real estate investment.
#1 Financing using your cash
With cash, an investor can significantly save up on interests charged on other financing options and maximize the return on investment. If you can, it is advisable to invest using your own cash. If you think of it even in terms of risk, it is better to lose your own cash than to lose someone else’s cash. The latter means you are left with a debt which you have to pay off. In addition, when you have cash, your offers are accepted much faster by the seller of the real estate property.
#2 You can opt to turn to traditional lenders
Many real estate investors have been known to opt for traditional lenders as the option to finance their ventures. The most common options they go are FHA and traditional loans. Investors prefer these options because they have traditionally attracted lower interest rates in comparison to other financing options. The main thing to keep in mind is that lenders here often have strict conditions attached to their financing.
#3 You can opt for hard money lenders
Hard money lenders are primarily private businesses or individuals who offer loans to potential investors. This loan can be in form of a short-term financing which is often at a higher rate when compared to banks. For this option however, you need to be careful because the lenders don’t conform to standards as compared to banks.
#4 You can opt for private money lenders
Private money lenders are almost similar to hard money lenders however, the difference lies in the level of interest in working with you. Most private money lenders will want to see you succeed and pay them back therefore they are more interested in working with you. All that is required is for you to go by the terms of repayment agreed. Their interest rates are usually also very reasonable.
As an investor, ultimately the choice is yours. We welcome your take on this article.