There are still many distressed properties out there waiting to be bought and revived. What options are there for financing them?
Distressed properties can present great bargains for real estate investors, and individuals and families who are simply seeking a great deal on a new house. Yet, there can still be a great need to finance these properties. That can present some challenges due to the condition of some of these properties which need some cleanup and repairs. That’s especially true when it comes to conventional mortgages. So, what other options are there?
Certain FHA loans can allow home buyers to get a purchase mortgage and the funds to fix up a property, all in one loan. FHA loans are also known for their low down payments, low credit score requirements, underwriting flexibility, and good interest rates.
Hard Money Loans
Hard money loans have long been the go to financing solution for those seeking to buy distressed properties in need of rehab. They are typically based on the value of the property, and less on the borrower. Though since 2008 many hard money lenders have been tougher on credit, income and asset verifitcation than conventional banks.
Transactional funding is a specialized type of lending for real estate wholesalers. It provides extremely short term funding for those flipping properties back to back within a few hours or days. One of the best benefits of this is type of financing is that it can deliver 100% financing, with virtually no qualifications.
An increasing number of individuals are choosing to invest their money directly with front line real estate investors, instead of through banks who eat up most of the profits. This type of financing can offer investors far more speed and flexibility for investors who need to act as cash buyers to get the best deals.
Lines of Credit
Some types of properties require cash to buy. Business lines of credit or home equity lines of credit can be ideal for these opportunities, can save time, lower the cost of financing, and speed things up.
Which of these types of real estate financing have you used? Which are your favorite?