Creative Ways of Financing For Real Estate Investors

Creative Ways of Financing For Real Estate Investors

The traditional way of obtaining financing for a property has been by the buyer putting down 20 percent or more of their own money in order to get a loan for the remaining 80 percent. But times have changed and there are many more available options. With today's lending institutions there are literally dozens of different lending products and financing options that are available for real estate investors or those looking to purchase a primary residence. Obtaining a line of credit is one of these financing options. In this scenario the buyer would have 5 percent of their own money as down payment. The remaining 15 percent could be had by taking out a line of credit. And while the line of credit interest rate would be higher than a traditional mortgage the monthly payments may still be fairly low since the loan amount is relatively small. There is, however, a down side to having a less than the 20 or 25 percent down payment for a property and that is it usually requires that the buyer obtain private mortgage insurance. The insurance fee is based on the mortgage amount and can be quite high. So putting a down payment of at least 20-25 percent will save you quite a bit on your monthly payments. There are other ways of finding financing. For example when looking to purchase a new home from a large builder. Sometimes the builder is willing to offer their own financing package for early buyers. This can be for as little as 5 percent of the total purchase price. For those who are willing to take on a bit more risk there are ways to buy a property and flip it even before the closing date. In this case a buyer would sign the purchase agreement and then immediately try to find another buyer. Here you are not really selling the property but the purchase agreement itself. On closing the property would change hands twice and the original buyer could make a few thousand dollars in profit without ever taking possession. This type of transaction should be let to experienced investors. Partnerships are another way of being able to get a mortgage especially for investment purposes. Partnership agreements can range from each party putting down the same amount as down payment, but it can also be structured so that one person has the down payment and the other partner would carry out the repairs or renovations. Upon the sale of the property the profits would be split according the amount of money that was originally invested. Government incentive programs can also be used but you should look closely as to who qualifies and the terms. These programs are also usually only available for those looking to a property as their primary residence but it can be an excellent way to get in to the real estate market. Money from friends or family members can be used as a down payment however most lending institutions require proof that the funds were a gift and not just another loan. You will also still have to qualify for the monthly payments. Researching all the available mortgage options will allow you to make the best decision for your investment situation. Just remember that it is not free money and that you goal is to invest in real estate and turn a profit.

A real estate professional Yannick Picard specializes in downtown Toronto condos and is an expert on the local housing market. Visit his site to search for homes, condominiums or Toronto lofts for sale and all of your real estate needs.