For some people, buying a second home or rental property is simply not an option. This is due to financing for real estate investment being far more complicated than a traditional mortgage or than financing for a home to live in.
According to Wells Fargo Home Mortgage, investors looking at long-term investment properties need to cover down payments (typically 20%), closing costs and have 2 years of property management experience to get a loan or to use their property’s rental income to qualify for a loan. On the other hand, for vacation homes or short-term investment properties such as time-shares, coops, manufactured home and bed and breakfasts, mortgage or home equity financing may not even be available.
But don’t let these financial factors stop you from investing in real estate.
If you are seriously considering investing in real estate and don’t know what kind of financing options or alternatives are available to you, we’re here to provide you with a list of choices for you to consider before investing.
- Using Your Current Home’s Equity: If you have positive equity on your current home, you may use it to finance a vacation or rental property. The downside is that your home becomes the security for the new home
- Private Lenders: If you don’t have the money to invest in real estate and don’t have family members or friends stepping in, consider working with a private lender that will allow you to finance the property and sometimes at a lower rate than traditional finance institutions.
- Foreclosure properties: Another way to get investment properties is by looking for one that is about to enter foreclosure or a property with an owner who is willing to transfer you the mortgage because they can not longer make payments.
- Skill Set or Cash Value Trade: You may be able to trade your skill sets if you are a construction worker, lawyer, accountant, etc. or exchange tangible goods such jewelry, collectible items, sports cars or a yacht for an investment property if you find the right kind of seller.
- Lease to own: Some sellers may rent you a property with the option to buy it. Others might even take monthly payments in exchange for using the property and put part or the entire amount paid towards the selling price.
- Partner up: Find somebody who is willing to go into the real estate investment journey with you. Someone who is trustworthy and easy to work with. It could be your spouse, a friend or even a co-worker.
- FHA Loans: Although FHA loans are only for homebuyers who are going to live in the property, there’s an exception to the rule if you buy a home with up to four separate units and you plan to live in one.
Real estate has proven to be a successful, profitable and stable form of investment for many years. And while financing might be a little more complicated for investors than it is for regular homebuyers, there are still options for acquiring a rental or vacation home.
We hope you find the right financing option or alternative for you from the list above. And when you are ready to take the first step towards real estate investment, give Rent It Network a call and we will guide you through every step of the way.