Ready to buy your first investment property in Metro Detroit? For first-time investors, financing is often holding them back from getting started. The problem is, time is money, and each year that passes lowers your potential lifetime returns, and it takes a pretty penny to make a pretty penny on real estate investments. There are alternative funding sources available, which will allow you to move forward with a purchase now, other than a conventional mortgage.
By taking the time to learn about all of your financing options, you will have the ability to take advantage of each when they best suit your real estate investment needs. Read on to learn about these financing hacks to buy your first investment property in Metro Detroit.
Hard money is usually a private loan from an individual or investors, typically for 12 months, that will allow you to buy your first investment property in Metro Detroit based on the property’s after repair value (ARV) rather than your personal information. These lenders typically charge an origination fee of two points. Because this is a form of asset-based financing, these lenders are not at all concerned about your ability to repay the loan because they will take possession should you fail to repay them. The profits for this type of lender come from the high-interest payments you made and selling the property. Because you are not going through the conventional approval process, hard money lenders can quickly make these loans.
On the flip side, banks offer soft money loans, which are longer-term loans with lower interest. Qualifying requirements for these loans are less stringent than hard money. These loans are the most often used way that that investors finance rental properties. Soft money loans are based, for the most part, on your credit history. These lenders do also consider your ability to repay the loan and DTI. Essentially a combination of both conventional loans based on credit history, along with the asset-based aspect of hard money loans, soft money loans are a great financing hack to buy an investment property in Metro Detroit.
Another hack to buy your first investment property in Metro Detroit is working with a partner as your source of financing. A credit partnership is a simple way to team up, with you locating the deal and your credit partner has the credit for a loan to buy the property. Allowing you to cosign on the mortgage loan will help to build your credit. You then take out a lease at a higher sales price with the option to buy the house. You would then get a loan, buy the property yourself at the end of the lease option, and rent the property out for profits. Or, you could sell the property. The most important aspect of this partnership is to buy low in a great location. A bargain property usually involves making improvements, but the payoff is well worth the elbow grease.
Whatever you do, don’t get in over your head using a financing hack to buy your first investment property in Metro Detroit. Keep in mind that real estate investing is a long-term business. Careful research into your financing options, understanding both the pros and cons of each, before deciding which path to take. If you don’t feel confident, stop. Reach out to a trusted investor and run the investment deal and the financing option numbers by them so that you avoid costly financing mistakes.
The professionals at House Full of Cash, LLC know the ins and outs of financing hacks to help you buy your first investment property in Metro Detroit. Why not get started right now? Send us a message or call House Full of Cash, LLC at 248-429-7754 today.