Are you interested in learning how you can financing an investment property? Click here for the ultimate guide to real estate financing options for investors.

The Ultimate Guide to Real Estate Financing Options for Investors

Real estate investors are snapping up homes at a record pace. They bought more than 18% of the homes sold in the fourth quarter of 2021.

If you want to invest in real estate, this is a good time to do so. Inventory is low and more people are renting homes.

Don’t rule out this possibility because you don’t have enough cash to buy a home. About 25% of investors financed their purchases in the fourth quarter of 2021.

You can do it, too.

What are your real estate financing options as an investor? Keep reading to find out.

Conventional Loans

Can you get a conventional mortgage to finance an investment property? Yes, private lenders will lend money to investors to finance a property.

Be prepared to pay a 20% down payment to get approved for the loan. Some lenders may want 30% down.

Lenders also expect investors to have plenty of cash reserves, a solid credit score, and assets to support the property.

Even though these are loans that conform with Freddie Mac and Fannie Mae, they’re not guaranteed through the federal government like FHA and VA loans.

Construction Loans

Is your goal to buy a property to fix and flip? A construction loan, bridge loan, or fix and flip loan might be right for you. These are also called hard money loans.

These are short-term loans that get paid back in 12-18 months. They tend to have higher interest rates because the loan is for an incomplete project.

That leaves the bank with a bad loan if the project gets delayed or not completed at all.

You can use the loan to fund the purchase and renovation of the property.

Home Equity Financing

A home equity loan is another possibility to purchase an investment property. You can borrow 80% of the equity in your home.

Those funds can get used to finance a down payment, buy a rental property, or renovate a property. How much you can borrow depends on how much equity you have in your home.

Home equity financing also ranks highly among these helpful tips for real estate investors to get financing.

Private Money Loan

This is one of the easiest financing options to understand. A private money loan is a loan from one person or company to a real estate investor.

You work directly with the lender. They use their own money to finance the loan and make money from the interest.

There are also peer-to-peer lending sites such as Kiva, Prosper, and Funding Circle. These sites match investors and entrepreneurs with private lenders.  

Real Estate Financing Options for Investors

Investing in real estate is a dream for many people. You can turn that dream into a reality with these real estate financing options.

If you have equity in your home and a fantastic credit record, you’ll become a real estate investor in no time. You can have one investment property or several properties.

For more tips to build a real estate business, check out the Business section of the blog today.  

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