Real estate is a billion-dollar industry, and investing in this huge industry provides a good source of passive money to build ample wealth. This sector offers a slew of personal and financial benefits that’s why it is considered as one of the famous vehicles to produce wealth. A real estate career is quite profitable if the person makes the right decision at the right time. However, to begin a real estate career, the person needs some real estate finance.
Real estate finance is one of the biggest challenges to initiate a real estate career. Mostly, the lack of real estate financing hinders the people to dive into this deep ocean, simply because they aren’t aware of the authentic financing avenues. For investment beginners, it is necessary to understand that understanding the tactics to finance a deal is as important as finding one. Remember, there is always a way to find the capital to kickstart a real estate career. Mostly, beginners in the real estate business face challenges in obtaining real estate financing.
What is real estate financing…?
Real estate financing is usually the real estate investor’s method of saving funds for a deal. This term usually refers to the method in which the investors secure their capital from an outside source to invest in their business. Real estate financing is obtained under legal terms and conditions by keeping in mind the benefits of both parties. Mostly, real estate financing for beginners is obtained from real estate loans.
Are you interested to jump into the real estate business but the lack of cash flow is holding you back? Well, you can avail the option of taking real estate loans. This is one of the best methods in the real estate industry to seal the deals.
There are many sorts of real estate investment loans that will be helpful for you to secure a cash flow, but the type of investment loan that you’ll choose will influence your success as a beginner investor. So, it is advisable to choose real estate investment loans that actually work for beginners in all aspects. Before you approach some lenders, you need to understand the loan options and how they work.
Here are some real estate loans for beginners that you should consider…
- HARD MONEY LOANS
If you are looking for short-time investment loans then hard money loans are the best option for you. These loans are from any company or professional individual. This type of loan is easy to acquire without any complex procedures. Also, Hard money loans are easy to secure shortly.
The major flaw of the hard money loan is that they have huge interest percentages. This interest rate can vary from source to source from which you are taking the loan.
This loan is beneficial for the investors who are working on a short-term fix-and-flip strategy.
- CONVENTIONAL MORTGAGE
Among the property loans, conventional mortgages are the most common. Mostly, real estate investors get this loan from banks or mortgage brokers. These are the most common forms of rental property loans that are acquired at lower interest rates.
The drawback of this loan type is that they have strict rules and guidelines which are difficult to qualify. Also, the loan taker needs to have a certain amount as down payment, and good credit history, and some other terms. Mostly, beginner real estate investors do not qualify for these requirements so availing of this loan is difficult. In case they acquire the loan by some trick, they end up with a higher rate of interest.
These loans aren’t for short-term financing, rather investors avail them to gain long-term benefits. They are typically acquired for a buy-and-hold investment strategy. They are paid monthly so it is easy to get rid of conventional mortgage loans.
- PRIVATE MONEY LOANS
Many non-professional individuals give loans to real estate investment beginners for investment property. People who have extra money lend the money to investors on specific interest rates to get a profit.
This loan type has flexible structures and fewer formalities so these loans are difficult to avail from the lender.
- PEER TO PEER LENDING
Peer-to-peer lending means getting a loan from other investors or any real estate agency. The basic process to borrow the peer-to-peer loan is quite similar to private loans or hard money loans, but the specifics are quite different.
Unlike other funding types, this type of real estate financing has a lower loan-to-value ratio than other types. This loan type has a higher degree of flexibility, so you can think about getting this loan for real estate investment.
- SELLER FINANCING
In some situations, both the seller and the investors can hit a mutually beneficial seller financing deal. In this real estate financing, the buyer makes payments directly to the seller. In this case, the investor can avoid lending hurdles.
- GOVERNMENT LOANS FOR INVESTMENT PROPERTY
The government also provides investment loans to real estate investors, based on some criteria. The government-backed loans require no down payments.
BONUS TIP:
In case you are wishful to get land in Park View City Islamabad then before getting the loan from the government, review the Park View City Payment Plans so that you can have a clear idea about the actual amount that you need to grab the property.
The drawback of this loan type is that it cannot be used to acquire the property solely. The common practice that investors follow after getting this loan is to acquire a multi-family house and rent it out. This is a good means to generate continuous passive cash flow.
- ASSET EQUITY LOANS
Many real estate investment beginners also try to avail asset equity loans. If you own any solid asset like home, gold, car, land, or any other valuable thing, then you can borrow the loan from any local bank against the equity of your asset.
For Example: If you own land in Park View City Islamabad, and you are wishful to invest in any real estate project like Capital Smart City Islamabad then you can use the one land equity to get another.
Mostly, real estate agents and investors can borrow up to 80% of the value of their asset equity. The drawback of taking this loan is that if you do not cope up with the monthly installments, you risk facing foreclosures. It is a wise practice to analyze the risk associated with this loan type, before taking it. Also, to pay the loan back you should have a steady source of income.
- REAL ESTATE BRIDGE LOANS
Bridge loans are commonly known as gap funding is not a permanent financing option, rather it is the temporary one in which the financing is secured by the investor’s existing property.
The investor’s property can be used to buy the new one before the previous one sells. This process allows the investors to bridge the gap from one property to another without buying or selling.
The major drawback of this loan kind is that it is more expensive than other loan options. In addition to the bridge loan, borrowers will also be responsible for making payments on their existing loans.
BOTTOM LINE:
The way to secure real estate loans isn’t an easy task.
Remember the suitable real estate loan for you depends upon your investment goals, financial status, and the type of property that you are wishful to buy. If you are armed with the loan types and the necessary documentation needed to qualify for the desired loan, then you’ll be the potential candidate to get the real estate loan.
FOR YOUR INFO:
Are you interested in making a real estate investment in Pakistan?
The federal capital of Pakistan has some state-of-the-art real estate projects, like the Park View City and Capital Smart City. Park View City Islamabad is located in the scenic views of the Margalla Hills, and Capital Smart City owns a premium location in the heart of Islamabad.
The Park View City Payment Plans and the Capital Smart City Payment Plans are quite appealing for investors because they are delivering maximum returns on investments.
Invest in these projects as a beginner, and get guaranteed profits.