A constant challenge that new and long-term property owners face is coming up with the funds. Purchasing additional properties to build a portfolio requires a steady cash flow. From getting started to obtaining additional properties without conventional mortgages, these real estate finance ideas will help you get the money that you need.
One of the simplest methods of real estate finance is to purchase your next property with cash. If you have the funds to purchase a small rental house, you can pay for the whole property up front. You will still need to bring the money to a bank and pass a check through the bank for the full amount. However, this is the quickest and simplest way to get your hands on a new property. It’s important to remember that this may not be the most profitable way to purchase rental properties. That cash could be used as down payments for several different properties for a greater potential return on investment each month.
Another uncommon way to obtain new properties is to borrow funds from a portfolio lender. This form of real estate finance is highly flexible. Here, the lender is using their money to purchase the property (or a portion) for you. Of course, for this you will have to agree to specific terms. Often a portfolio lender will require higher interest rates than a traditional mortgage would. When dealing with this sort of lender, you can get away with lower credit scores or having less experience.
In the United States, one way to obtain properties easily is to utilize FHA loans. These loans come from the Federal Housing Administration and have lenient standards compared to some other property loans. These loans are meant for homeowners that will be living in their properties. There are loopholes that would allow you to purchase something like a duplex, and rent out the remaining units as long as you live in one of them. FHA loans can be a good way to get into real estate investing. Just make sure you understand the terms first since it can be limiting.
Investors that own several different properties can leverage the equity in those buildings to get funding for additional purchases. For instance, through home equity loans or property-backed lines of credit. Perhaps your lender doesn’t think you have enough cash flow to justify another loan. Then you may be able to use your own equity to get the cash to make that next purchase.
Be careful using home equity to purchase new properties. Failure to make payments on that loan can result in the loss of your other properties as well. Only use this method of funding when you are very confident in the purchase that you plan on making.
If you’re struggling to come up with the capital that you need to complete a real estate purchase on your own, it can be beneficial to establish an equity partnership in order to come up with the remaining capital that you need. There are many different ways that you can structure a partnership, and you could use the partner to fund the entire property, to cover the down payment cost or to fund a portion of the property depending on what your needs are. Partners usually require a portion of the returns from the property purchase, but they can be a convenient tool for obtaining the funding that you need.
Obtaining funding for property purchases can prove difficult, especially if you already own many different properties. Talk with the experts at Blueground to learn about how renting out one of your vacant apartments through us can allow you to finance your next real estate acquisition. As your primary tenant, we guarantee monthly rental payments while furnishing and subletting your apartment to business executives. Especially when your time is tied up with researching new investment opportunities or other business matters, Blueground takes care of tasks big and small (from finding tenants to repairing plumbing).