Real Estate Investment Loan Options

If you were hoping to build some wealth with real estate investing you may be looking into your investment property loan options. Purchasing investment property requires a considerable amount of money. A small percentage of real estate investors actually purchase their properties with all cash.

It is not uncommon for a loan on an investment property to be more expensive or have more requirements for qualification as compared to the purchase of a primary residence. This is because a majority of lenders consider investment properties a higher level of risk to loan money for.

Here Are Some Loan Options For The Purchase Of Real Estate Investment Properties

Hard Money Loans

Hard money loans are those for the purpose of real estate investments that are issued by private individuals or companies. These can be considered within the non-QM mortgage category as they are not backed by any government or federal entity. With a hard money loan credit and income are not considered as a qualifying factor.

This type of real estate investment loan is easier to qualify for especially if you are a borrower that is self-employed and does not traditionally look like a viable candidate on paper through the means of a tax return.

Another benefit of using a hard money loan is that the approval process can be faster as compared to traditional conventional mortgages. Many times, a hard money loan can be approved in as little as one or two days. One of the drawbacks to using a hard money loan is that it can be more expensive. They can come with higher interest rates and a larger amount of processing fees.

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Private Money Loans

Using a private money loan is the process of borrowing a short-term loan from a family member or a friend for your investment property. This requires a huge amount of trust and confidence in your relationship as well as the ability to stick with what is promised in the lending agreements.

It is always wise to have a third-party present if you are able to secure a private money loan this will help to ensure that there are legal parameters and paperwork signed as well as a full understanding of what the loan contract states and holds both parties accountable to.

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Portfolio Loans

A portfolio loan is offered by a company that is considered a portfolio lender. This lender is most often a bank or institution letting out their own money from their own portfolio as compared to expecting another entity to purchase a loan after it’s originated. These portfolios held by portfolio lenders are a collection of loans they have kept and managed themselves.

Using a portfolio loan allows a real estate investor to build a relationship with the lender. This is a good idea if you hope to purchase more properties in the future. If you are a responsible borrower and continue to make timely payments this will look favorable and help you to secure investment loans in the future with the same lender.

The best way to find out the best options for mortgage loans on investment properties is to consult with a mortgage broker who specializes in these types of loans. They will already know the available products on the market and, after taking some personal information, be able to shop around for the best investment property loans for you.