How to Finance Investment Property
September 22, 2017
If you want to be one of the thousands of people who own commercial or residential commercial real estate, you will need know how to Finance Investment Property expenses including your property loan and sometimes renovation expenses. You can easily do this by having good credit, knowing where to find financing and being prepared with the proper paperwork.
1. Run your credit history to make sure you are in a position to secure financing.
- Follow up with correcting any mistakes on your credit report.
2. Fund your investment property with your own monetary resources.
- While it is a high-cost venture, financing with your own capital leaves you with fewer people or entities to answer to and less red tape to go through.
- Funding the property by yourself, though, means that you also assume all of the risk as well.
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3. Consider taking on a partner or partners.
- Splitting the cost with an investment partner or partners will again allow you to avoid red tape, as well as not sink all of your money into one project.
- While you may have a positive working relationship with your partners, make sure that you have an iron-clad contract in place.
- Agree on what percentage each partner is going to put in as well as what percentage each partner will be paid out.
4. Secure a line of credit through a traditional lending institution.
- Be prepared to fill out a large number of paperwork. Bring past pay stubs, old W-2s, and any available information on the property itself.
- Use your line of credit to purchase of the property as well as pay for improvements to the property.
- Use the money generated from the income off the property to pay down or pay off the line of credit.
- Resell (otherwise known as "flip") the property and pay off the financing. By doing this, you will make sure that your line of credit is in tact and you have a nice down payment for your next property.
5. Discuss with your realtor alternate financing options.
- Some property owners may offer financing or builders of new construction properties sometimes offer financing as well.
6. Find a private investor or private investment group.
- Investors pool their money together to finance properties, and they would earn a profit similar to that of how a bank earns interest.
- Ask your realtor or perform an online search to find private property investors in your vicinity.
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Source: Wikihow