When finding ways to fund your rental property investment, it’s important to have a solid business plan and determine what your unique needs are. For example, how many investment loans can you qualify for? What lender will finance the type of property you want to purchase? Real estate is considered capital-intensive, so we recommend finding a path of creative financing. Here’s a list to help you get started.
How to Fund Your Rental Property
1. All Cash Offer
Very few buyers have the resources and discipline to pay cash for a property. In the seller’s point of view, cash offers are more attractive than conventional or FHA loans. Not only are cash offers clean and simple, but they are also more likely to close quickly. A fast closing allows a short escrow period, which puts money into the seller’s pocket sooner. Additionally, there are no banks that can get in the way of closing the sale. Other benefits include:
- No mortgage payment
- Available equity
- Security during market fluctuations
- No restrictions on title transfer
2. Private Money Loan
Private money is a loan from a private party, which may include a friend or family member. If you don’t qualify for a traditional loan, consider using private lenders. According to Nasdaq, private loans are ideal for investors who want to buy a property that requires a good amount of repairs. There are several advantages of private money lending, including fewer requirements and faster approval. A major drawback includes a higher interest rate. Although the standard interest rate for private loans is 15%, the borrower may be required to pay up to 20%. To find a private lender, take advantage of your current real estate network, social media, inner circle, and search engines.
3. Hard Money Loan
Hard money is a specific type of real estate loan from a private business or individual. Hard money lenders take a different approach than traditional lenders. They lend to borrowers based on collateral, so they don’t require income verification, credit references, etc. Hard money loans are considered faster and more flexible than traditional loans. Although this may seem like the perfect option for real estate investors, it’s important to consider the disadvantages before you get a hard money loan. Borrowers will end up paying higher interest rates and more loan fees. To find a hard money lender, search for local investors who will lend money based on collateral.
4. Owner Financing
Another creative way to fund your Denver rental property is asking the seller to offer you owner financing. Owner financing is when the purchase price is financed by the seller. Instead of dealing with a bank, underwriters, or additional hang-ups, the buyer will interact directly with the homeowner. The requirements will be at the owner’s discretion. If the homeowner owns the property free and clear, they may agree to carry all of the financings. In this case, the buyer and seller will agree on the interest rate, terms of the loan, and monthly payment amount. If done right, owner financing is a win for both the buyer and seller.
5 . Multiple Property Loans
Purchasing multiple rental properties is a great way to make a profit. However, it may be more complex to finance each property. Fortunately, there is a specific loan for this situation. Multiple property loans are used to finance multiple properties into one commercial loan. This unique loan benefits real estate investors who own several different properties and want to purchase more. Unlike residential lenders who only finance up to four properties, multiple property loans require a minimum of 5 properties. These properties can be located anywhere in the United States.
Learn More at Keyrenter Property Management in Denver
Every real estate investor has unique needs, so it’s important to do your research when searching for a loan. Once you acquire your loan and property, you’ll need to hire an experienced and trusted property manager in Denver. Keyrenter Property Management has been providing property management services to thousands of homeowners in Denver and across the nation for over 10 years. Whether you own one or multiple properties, our professional staff is ready to manage and maintain your rental property. Call our team today and discover how we can make your life less stressful and more enjoyable.