Investing in real estate is the top way Americans choose to invest their money. Whether you're purchasing properties for yourself or ones to rent out, investing in properties is a great way to grow your portfolio long-term.
It can be challenging to learn all the different ways you can secure funding for real estate deals. This blog will go over the basics of real estate financing. Make educated financial decisions by following our property investment tips.
What Is Real Estate Financing?
Real estate financing refers to the ways an investor gets money for an upcoming deal. Investors typically have to get capital from an outside source to purchase and renovate their properties. These properties can include:
- Land
- Homes
- Apartment buildings
- Office buildings
There are many mortgage financing options to fund a deal when you're a real estate investor.
Cash Financing
Cash financing provides investors with numerous benefits. These can include:
- Increasing their cash flow
- Saving on interest
- Receiving instant equity
- Saving money on the purchase price
There may be some times when purchasing a property with cash doesn't make sense. In those cases, it's a good idea to pursue investment property loans.
Hard Money Lenders
Hard money lenders are typically individuals and private businesses. These lenders provide investors with high-rate and short-term real estate loans. This option is usually used by those who want to renovate a property.
Private Money Lenders
Private money lenders have the interest and means to invest capital in properties. Not only are they able to lend money, but they want to work alongside you as well.
Private money lenders usually give investors the cash needed to buy properties in exchange for a certain interest rate. These loans are popular in real estate transactions where the investor can quickly increase the value of the property.
Seller Financing
Sometimes a seller and investor can create a mutually beneficial financing agreement. In this instance, investors make payments directly to the seller. This can result in a faster transaction process and avoid various fees and costs.
Self-Directed IRA Accounts
A self-directed IRA account is a savings account that allows for tax-free and compounded growth over time. Owners of these types of accounts can use them to purchase and sell properties while deferring taxes. Keep in mind that those under the age of 60 can get penalized for withdrawing money from their accounts early.
Partner With an Experienced Real Estate Company
It can be difficult to figure out what real estate financing option is best for your situation. Learning everything you can about financing is key, especially when you're just starting out as an investor. Working with a professional real estate company in McMurray is the best way to set yourself up for success.
Real estate experts at The Burgh Property Management have experience helping local investors purchase properties. We'll work with you to assist you with securing the best deals, saving you money in the long run. Reach out to our office to speak with one of our real estate professionals.
