Over the years, real estate remains one of the lucrative investments around. The increasing demand for housing and ownership of homes makes real estate a valuable investment option. Investing in real estate allows you to enjoy a steady income and cash flow on the properties you own.

Ownership of properties is not all there is to real estate, you can choose to invest in real estate investment trusts (REIT). This economical sector is an equally reliable investment and pretty profitable.

There are many reasons and benefits to investing in real estate. However, you will require adequate capital and funds to finance this investment. This article will enlighten you on the most reliable options to finance your investment in real estate.

How To Finance Your Real Estate Investment

There are a few loans available for financing your investment property.  Before choosing an investment loan, you need to be aware of every investment loan and its requirements.

Here are some of the trusted loans to get sufficient funding for your real estate investment:

Conventional Bank Funding

Conventional financing is one of the most common financing options available. These loans aren’t serviced or backed by the government. You will be expected to make a down payment of the property purchase price to the lender.  The average down payment percentage is often around 20% depending on the lender.

For you to secure a conventional loan, you must have a good personal credit score and credit history. Debt settlement is a very good option to improve your credit score.  This method is very helpful in settling negative accounts which can help increase your credit score. Also, lenders like to assess the assets and cash flow of their borrowers. Erasing any old debt from your credit report and credit history will improve your credit score and increase your chances of getting a conventional loan. These steps are taken to examine the borrowers’ ability to repay the loan on their investment property in due time.

There are also certain existing mortgage commissions that borrowers must be able to cover. Lenders ensure that borrowers have put some money aside for this purpose. This is why lenders also make these assessments to evaluate the borrower’s capacity to fulfill these financial obligations.

Conventional financing takes your credit score in to account as the better your credit score, the higher your loan limit. Due to the rigorous and meticulous screening of borrowers, securing this loan can be difficult. However, conventional loans offer one of the best interest rates available for your investment.

Hard Money Loans

Another way for financing your investment is through hard money loans. If you are interesting for the first time then this is one of the financing options you should consider. Hard money loans are pretty lenient on credit scores compared to other loans. In this case, the major idea of the loan is the value of the property involved.

A hard money loan is also known as a fix and flip loan. This loan makes use of your physical assets as collateral as a backing for the loan collected. This loan isn’t often the first choice many investors consider when trying to get financing for their investment. However, unlike other loan options, hard money loans are centered on the worth of your assets.

This option is good for investors with low credit scores ad poor credit history. The good thing about hard money loans is qualification process and loan approval are quite easy. The interest rates of hard money lenders are inevitably higher than other loan options due to their method of financing.

Private Individual Lender

Private individual lenders are one of the most popular options for those that cannot make full down payments. They are often willing to lend to those interested in real estate investment. The mode of profit for these lenders is tied to the increase in the value of the properties landed by the investor.

Private individual lenders do not work with financial institutions o companies. They are less rigid and easy to deal with than other financial institutions. Also, they provide needed funds within a short time. You do not have to go through the constant struggle associated with other financial institutions.

This option is also ideal if your credit score or profile doesn’t meet the required standards of other financing options. However, the common setback to this option is the higher interest rates involved compared to financial institutions like the bank. These rates are understandable

How To Invest In Real Estate

Real estate is a profitable economical sector and how you choose to invest in it largely depends on your financial capacity and expectation.  Here are some of the various ways you can invest and make money in real estate:

Real Estate Investment Trust (REIT)

Real Estate Investment Trust (REIT) is a safer method of investing in real estate which poses a lesser risk than investment property. REITs are controlled by a trusted company with different properties which you and other investors can invest in.

Your investments in these trusts go into the purchasing and development of these properties which in turn would gain value and yield profit. You can invest in different kinds of REITs that concentrate on different properties such as supermarkets, restaurants, hospitals, and so on.

This investment also makes use of a broker which is an effective intermediary between an investor and the company. REITs are very good low-risk investments which is a great place to start for investors new to real estate.

House hacking

House hacking is another profitable way of investing in real estate. House hacking simply involves the purchase of an apartment with many flats. You could then decide to reside in one of the flats while leasing out the rest. This method generates money for you through the rented-out apartments. You also get to save money on your expenses by living on the property purchased.

However, you do not necessarily have to reside in the apartment you purchase. You can decide to hire property managers or caretakers to handle the affairs of your investments. House hacking is a solid platform to make some money in real estate.

As the owner of this investment, the burden of renovations and the cost of maintenance falls on your shoulders. This investment is similar to rental property and part of the few disadvantages attached.

Flipping Houses

This investment is quite simple. All you have to do is to purchase a house or building, renovate it to your desired taste. After furnishing, you can sell it for more than the amount you acquired and renovated it.

This is not a guaranteed investment as it isn’t a certainty you will get more on your property. However, if you make the right move you could get a profitable return on your initial investment.

Conclusion

Real estate investment is a great financial investment that requires large funding. However, capital remains a stumbling block for many potential investors. We have narrowed down the best options available for financing your real estate investment in this article. You can now choose the best option for you based on your financial situation and purpose for the investment property.