Investment properties are an excellent way to generate income. You can choose to have the property leased or sell it in the future. The best thing about real estate is it appreciates over time. The tricky part is financing your purchase.
If you have plans on buying an investment property, here are five financing options you can choose from.
Cash Out Refinancing
If you are a homeowner and you already have enough equity in their home, you can use that to your advantage to buy an investment property. What you need to do is to look for a home equity loan through an authorized mortgage lender. This allows you to use your home as collateral to tap on your home equity.
All you need is to get approved for a texas cash out refinance investment property by submitting the requirements. If you do choose this type of financing, it would be best to ensure you can keep up with the monthly mortgage fees. With texas cash out refinance investment property, you’ll receive a lump sum of cash of up to 80% of your equity.
Conventional Mortgage
If you still don’t have enough equity on your home, consider applying for a traditional mortgage. For this type of home loan, you’ll need to put down 20% of the investment properties’ purchase price. This will then eliminate PMI fees. You must provide financial documents proving you’re financing stable, have a good DTI ratio and credit score along with other requirements set by your lender.
Good Read: How to get rid of PMI, or private mortgage insurance
Real Estate Partnership
Some investors are willing to help you finance an investment property. While you lack the funds to fulfill the purchase, they can help pay either for the down payment, or a portion of the purchase price. After agreeing to the terms, you can buy the investment property, and all of the expenses and profit will be divided between the two of you depending on the deal you made.
Seller Financing
Although seller financing is uncommon, there are still those who are willing to finance your finance purchase. The seller of the investment property will write a contract based on the terms, interest rates, monthly payments, payment schedule, and other fees. It will also include the consequences if you fail to abide by the contract. While this tends to be a fast and easy transaction along with flexible down payments, it has its drawbacks. It can have a higher interest rate, and you can face balloon payments that can be a risky move if you can’t manage your finances wisely.
Also Read: Owner Financing: Advantages and Disadvantages
Cash Financing
For those who have sufficient funds, you can buy an investment property through cash financing. This is the easiest way to acquire a property minus the hassles that come with a loan application. The best thing about cash financing is you get to make an offer to the seller as soon as you find an investment property you like. There are no interest fees to pay, plus you get to negotiate a better price by paying the seller in cash.
