If you’re wondering if it is a good time to invest in real estate, you need to realize that while things have looked better than they do now, this leads to low-interest rates. These low-interest rates are helping investors attract buyers. If someone is looking to buy a property, why not invest in property and have them buying from you instead of someone else?
With tightened credit markets, getting a loan for an investment property can be tough, but by being prepared and a little creative, you can usually find a way to finance your investment property. Of course, a lot of that depends on whether or not it is a good, solid investment property.
It always helps to have a sizable down payment. You should have at least 20% down when you begin looking for financing. Having as much as 25% may help you get better interest rates. You should also know all of the policies of the lender you’re trying to get to finance the property. The first thing they’re going to do is check your credit rating, so you should check it before your visit to the finance establishment. Review your credit rating to make sure there are no snags that you’ll run into with financing. You can check your own rating by visiting myBankrate.com for free.You want your rating to be above 740. If your rating is below 740, you can expect to have a higher interest rate.
If you have no idea about financing and are looking to finance, there are several places you can look. Here are a few places to look for investment financing and tips for looking for financing in each of these areas:
- Banks—This is an obvious choice, but understand that choosing the right bank is important. If you don’t have a large down payment, going to a large financial institution may be a waste of time. Looking for a small, local bank may give you greater flexibility for financing. A local bank, on the other hand, will know what the market is like in that particular area. The local banks will be able to determine if it is a good investment. They’re more likely to invest in first-time investment property ventures than larger, more impersonal banks.
- Mortgage brokers—Brokers have a wide-range to choose from in finding a loan for your purposes. They are often a better choice than a bank when looking for financing. Be sure you research them before you choose one. You don’t want to invest in a broker and find out later they were a fraud who swindled you out of your money. Find people who have used that particular broker and find out if they were satisfied with the performance of the broker and the terms of their financing agreement.
- Owner financing—While many owners may not want to finance, it isn’t always out of the question to ask. Make sure you are prepared in advance if you want to try this. Tell them how much money you want to finance and what terms you want. You need to present in a way that you can actually “sell the seller” on the idea of financing you and why they should take a chance and self-finance the property for you.
- Private loans—If you find a really good price, you may know someone who has the money to finance it for you. It isn’t always to borrow from friends. If you decide to, make sure the terms of the agreement are beneficial to both parties and adhered to strictly by both parties.
- Peer-to-peer lending sites—This is a newer type of investment opportunity that is growing by leaps and bounds. You can find these buyers on sites such as LendingClub.com and Prosper.com. These investors help link investors and lenders. Be expected to face people who are more conservative. After all, it is their money they’re investing. They want to make sure you can repay the loan before they take a chance. Often it isn’t just one individual, it is several investors that work together to finance loans, so be prepared to work with more than one person.