You've seen the shows on Hulu -- your guilty pleasure house flipper shows. There are plenty of them, and each one brings you joy at how they transform terrible properties into treasures.
You admire how much they make, but you can't help but wonder how they can afford these old homes. They can't be cheap, even in their poor condition.
The trick is real estate financing. These home flippers must put a lot of capital into real estate investments to earn their income.
Come along and we'll give you the inside scoop on financing real estate purchases. Perhaps you can use these property financing tips yourself one day.
Real Estate Financing: Real Estate Loan Types
Real estate financing describes methods used to buy real estate -- like homes, office buildings, investment properties, and land. It is more commonly used to get investment properties.
Mortgages are common investment property loans. However, traditional bank loans often require higher down payments than other loan types. Investors must meet minimum credit scores, assets, and income.
FHA Loans
FHA loans are underwritten and paid for by third parties backed by the Federal Housing Administration. Unlike traditional mortgage loans, an FHA loan doesn't require a good credit score or funds for large down payments.
203K Loans
203K loans are another type of FHA loan for financing and rehabilitating damaged or old homes. The home must be at least a year old and can range from single-family homes to condos.
Home Equity Loans (HELOC)
HELOC loans allow investors to borrow against the equity in your home. Your house becomes collateral for the line of credit. Once you repay the balance, the credit will be replenished.
You can use HELOCs for large expenses, like property down payments. They're useful for combining debts on for other high-interest loans.
Lease-to-Buy
A lease-to-buy contract allows tenants to rent properties from owners with the choice to buy them at a prearranged price. These contracts can include agreements where rental payments contribute to the buying price.
Cash Financing
All-cash home buyers represented around 34.1% of home buyers in 2023. This choice is common among those with private funds or through a network. Cash lets investors buy without ongoing loan payments.
VA Loans
VA loans are only available to military members, veterans, spouses, and non-military uniformed service members. The Department of Veterans Affairs oversees these loans.
VA loans have little down payment and no private mortgage insurance (which might be mandatory). These loans offer competitive interest rates.
Finding the Right Investment Property Loans
Real estate financing comes in many forms. The type of real estate loan you choose should depend on your personal and financial circumstances.
There are many sources for investment property loans, but PMI Destination Properties is your best source for property management. We can help you market and find the right renters for your properties.
PMI Destination Properties can assist with rental collection, accounting, maintenance, and more. Contact us to get the most out of your investment. Our team is on standby and willing to help.
