Different Methods of Financing Real Estate Investments
Real estate is a popular investment option because of its stable returns and potential for growth. However, it’s important to understand the different methods of funding real estate investments before getting started. Whether you choose to pay cash, take out a traditional mortgage, apply for a government-backed loan or utilize hard money lending, the right financing strategy will help you achieve your financial goals. The real estate industry encompasses the buying, selling and leasing of property. Licensed professionals like brokers, agents and appraisers facilitate these transactions. They also provide advice and guidance to investors and clients on the best way to proceed with a real estate investment. Residential Real Estate This type of property includes single-family homes, condos, cooperatives and townhomes. It also includes multifamily buildings, such as duplexes and triplexes. Residential real estate is the most common form of investment and is a vital part of the economy. The market fluctuates depending on the economy, with rising home sales indicating a healthy economy and declining sales indicating a struggling one. Commercial Real Estate This category includes properties used for business and commercial purposes. This can include strip malls, shopping centers, offices, educational and medical buildings, and hotels. It also includes apartment buildings, although these are often considered commercial because they’re owned to produce income. Industrial real estate is another subcategory and includes properties used for manufacturing, warehousing, and production. Land – This category includes vacant lots and land that’s under development or may be slated for residential, commercial or industrial uses. It can also include working farms and ranches. Subcategories within this category include undeveloped, early development or reuse, and subdivisions and site assembly. The most common method of funding a real estate investment is to use your own equity, which can be done through a private equity loan or an owner-occupied mortgage. You can also opt for a government-backed loan, such as an FHA or VA mortgage, which are backed by the federal government and offer low down payments and competitive interest rates. Another option is to seek out hard money lenders, which are private entities that provide short-term loans with high interest rates. These loans are typically used by investors seeking to rehab a property and are not subject to bank creditworthiness standards. It’s important to avoid any fraudulent activities when investing in real estate. Fraudulent activity can result in loss of your hard-earned equity and could even lead to legal action against you. You should also know that mortgage lending discrimination is illegal, and you may be able to file a claim against a lender if you’ve been denied a loan because of your race, religion, gender, sexual orientation, use of public assistance, national origin or disability. If you think you’ve been the victim of discrimination, it’s important to take immediate action. Click the banner below to learn more about the steps you need to take to protect your rights.
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