Purchasing investment properties is one of the world’s most reliable ways to grow wealth.
Yet many people assume investment properties are out of their reach. If you’re someone who thinks only rich people get to invest, here’s great news. There are many options for investors, and many are available to people just like you. In fact, a conventional mortgage may not even be your best choice!
Here are some of the most common options.
Home Equity Loans or Refinancing
If you have a significant amount of equity in your primary residence you may be able to take out a home equity loan large enough to pay for an investment property.
A cash-out refinance may also offer funds for a down payment.
See also: What is a Cash-Out Refinance?
DSCR Loans
A Debt Service Coverage Ratio (DSCR) loan allows you to use the property’s rental income to qualify for a mortgage, rather than your own income.
You can use these loans to buy multi-unit properties.
You will need a minimum credit score of 620 to qualify for one of these loans, and you will need a down payment of at least 15%. It’s also a good idea to have a cash reserve on hand so you can meet your repair and habitability obligations to your tenants.
See also: Essential Tips for Using DSCR Loans in Atlantic Florida Investments
Hard Money Loans
If you are hoping to fix and flip, a hard money loan may be an excellent option for you. The loans are based almost solely on the value of the real estate and do not look at your credit history, income or assets.
These loans have high interest rates and short terms, so you’ll need to feel confident you As of this writing, they hover around 10% for a one or two year loan.
See also: The Ultimate Guide to Hard Equity Lending vs. Traditional Mortgages
Private Money
Some real estate investors finance their properties with money from friends, family members, or private associates they have networked with.
Terms for these loans depend on the lender, and you should carefully consider the potential impact on your relationships.
Conventional Loans
You always have the option of taking out a traditional mortgage on a second property and paying it as normal.
Future rental income won’t factor into the bank’s calculations. You might calculate the future rental income to determine whether the loan makes sense.
See also: Navigating Conventional Home Loans in Broward, Palm Beach, and Miami-Dade Counties, Florida
Find the Right Real Estate Investment Loan with Alex Doce
You need a great advisor by your side if you’re investing in real estate for the first time.
Alex Doce can help advise you on which of your home loan investment options make the most sense. He can also help you secure the right investment loan with great terms and low fees. Take advantage of his 36+ years of experience to get the information you need to start your investment journey!
