Real estate investing comes with a wide range of great ways to generate income, but if your plan is to generate wealth over the long term and ultimately quit your job, it is essential to start building up a portfolio of cash flowing investment property. A typical way to finance the expansion of a real estate portfolio is through conventional Fannie Mae financing since it provides good rates and long mortgage terms. Nevertheless, though a traditional bank loan is great for long term financing, it's not always the most suitable tool for buying a property.
Many real estate investors have built massive portfolios of real estate by saving up down payments and funding their deals with traditional home loans. The challenge here is that if you have modest investment capital, you're likely to exhaust your money long before you accomplish your objectives. Banks nowadays are requiring minimum 20% down, but you'll really need 25% down if you want much better loan terms.
If you have limited cash, the best way build up an investment property portfolio is to find value investments - similar to how Warren Buffett acquires stocks. You aren't hunting for the attractive, fixed up properties that cost a premium, you are searching for the unsightly, smelly, ugly buildings that nobody else wants. The idea is find properties you can buy, fix up, and finance for 70% of the after repair value, or ARV.
A traditional bank generally will not want to lend on a building that's not in good condition, so you'll want to search out hard money or private funds to finance these kinds of deals. Yes, you are likely to pay higher rates and costs, but it's just the way it works. Think of it as a cost of doing business and account for these costs in your offers. If you are buying for prices that permit you to acquire, fix up, and finance for 70% of ARV or less, you should have little trouble getting these types of lenders to finance your deals - and often with little or no money out of your pocket.
If you have structured your deal properly and have a minimum 30% equity position in it once it's completely rehabbed, you can easily refinance the hard money loan into a long term bank loan and meet the 20% to 30% equity requirements of a traditional mortgage loan.
Now don't get me wrong, an investment property bank loan isn't just about a 20% or 30% equity position. A good credit rating, reserves, income, etc., all still play a part to get you qualified. However, if limited cash is your han up, buying value properties with built-in upside will tremendously boost the expansion of your business.
Many real estate investors have built massive portfolios of real estate by saving up down payments and funding their deals with traditional home loans. The challenge here is that if you have modest investment capital, you're likely to exhaust your money long before you accomplish your objectives. Banks nowadays are requiring minimum 20% down, but you'll really need 25% down if you want much better loan terms.
If you have limited cash, the best way build up an investment property portfolio is to find value investments - similar to how Warren Buffett acquires stocks. You aren't hunting for the attractive, fixed up properties that cost a premium, you are searching for the unsightly, smelly, ugly buildings that nobody else wants. The idea is find properties you can buy, fix up, and finance for 70% of the after repair value, or ARV.
A traditional bank generally will not want to lend on a building that's not in good condition, so you'll want to search out hard money or private funds to finance these kinds of deals. Yes, you are likely to pay higher rates and costs, but it's just the way it works. Think of it as a cost of doing business and account for these costs in your offers. If you are buying for prices that permit you to acquire, fix up, and finance for 70% of ARV or less, you should have little trouble getting these types of lenders to finance your deals - and often with little or no money out of your pocket.
If you have structured your deal properly and have a minimum 30% equity position in it once it's completely rehabbed, you can easily refinance the hard money loan into a long term bank loan and meet the 20% to 30% equity requirements of a traditional mortgage loan.
Now don't get me wrong, an investment property bank loan isn't just about a 20% or 30% equity position. A good credit rating, reserves, income, etc., all still play a part to get you qualified. However, if limited cash is your han up, buying value properties with built-in upside will tremendously boost the expansion of your business.
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