Navigating Real Estate Financing: Options and Considerations

Navigating Real Estate Financing: Options and Considerations

Investing in real estate is a smart move for investors looking to earn passive income and grow their wealth. That's probably why 63% of Americans have invested in the sector, compared to 54% who have invested in the stock market.

Whether you're buying your first home or rental property or you've been investing for several years, one thing about real estate investing doesn't change: it's a capital-intensive venture.

This hasn't discouraged people from expanding their real estate portfolios, though. That's because the world of real estate financing is robust. As long as you know your way around the market, you can raise money for your real estate investments.

Read on to learn more about your options.

Traditional Mortgages

Getting a mortgage is the first thing that comes to mind when the average person is looking to buy a home. Seeing that about 60% of homeowners in the U.S. have a mortgage, you can conclude that the chances of getting approved for one are high.

There are different types of traditional mortgages, and they all have unique eligibility requirements. The conventional mortgage is available to any consumer who meets credit score requirements and can pay a deposit. However, other home loans, such as FHA and VA loans, are only available to certain populations.

As long as you qualify for the mortgage you're seeking, you can be funded with up to 80% or more of the capital you need. You can then buy and rent out the house to earn rental income.

Commercial Mortgages

Commercial mortgages work like residential mortgages, only that they're designed for people who are investing in commercial real estate. This could be an office block, skyscraper, warehouse, or raw land.

Commercial buildings are typically more costly than residential houses, so the minimum requirements for getting a commercial mortgage are even higher. For example, the deposit can be much higher.

Also, not all banks offer commercial mortgages. As such, you must research various lenders and find one that offers commercial credit products.

Hard Money Loans

Ordinarily, when you want a mortgage, you go to a bank or credit union. These aren't the only organizations offering loans, though. There are private financial companies offering hard money loans.

Unlike conventional mortgages, hard money loans are easier to access but typically carry higher interest rates. The property being purchased is attached as collateral.

Although you can easily qualify for a hard money loan, it's advisable to go for them only when you have no other choice. Given the high-interest rates, you'll pay back a lot of money to the lender. This can put a big dent in what you'll make in real estate investment, and you could even go into losses.

Leverage the Power of Real Estate Financing

Real estate financing unlocks unlimited opportunities for real estate investors. Don't let a lack of adequate funds kill your dream of owning an investment property.

Understand your real estate financial options and then find lenders you can bank on. You also need an experienced real estate professional to guide you along the way.

PMI Sunshine State is a real estate management company based in Miami, FL. Led by an owner who's an experienced investor and property manager, our team helps investors acquire and manage residential and commercial properties.

Contact us today to speak to a professional.