Oftentimes when investors get into any property investments they tend to use their funds first. It starts as great for the first few properties but sooner or later most investors run out of capital to continue. They then have to figure out ways to finance their property investments or quit buying real estate.
We’re here to tell you the latter doesn’t have to be an option. There are several financial avenues for you to compete and stay in the real estate business. And as an investor keen on buying investment properties in Baltimore, we can offer you consistent financial ways for you to beat the competition and grow your portfolios.
In this blog post, we are going to explore those financial avenues to get you back on track and finance your investment properties in Baltimore. Let’s get started.
A conventional loan is your standard avenue to financing your property investments and is one of the best options for investors.
Conventional loans are any kind of loan that you can get through a private lender. This means loans that are given without government entities. Since these private lenders are funding your loan without any security from the government, they take all the risks in giving out these loans. So if you end up not being able to pay up the loan, it is up to the lenders to sell whatever property you’ve invested in to make up the money loaned.
But there are convincing pros to getting a conventional loan for you to finance your investment properties in Baltimore.
- Conventional loans have lower closing costs than other loan options. So if you have your down payment ready to go, you can put it down without incurring additional fees.
- There’s little or no mortgage insurance payment required
- You can purchase a second home or new investment properties in Baltimore with conventional loans.
- Conventional loans offer you down payment options from 3% and above
- One major con of a conventional loan is the longer time it takes to apply for another loan if you have a foreclosure on your record. It might affect you when you want to hop on an available property.
- There are also tougher credit and income requirements with conventional loans. Since the lenders are taking all the risks, they are thorough and strict with requirements.
Hard Money Loans
Hard money loans are an investor’s go-to to finance their fix and flip investment projects. They are short-term loans favorited by house flippers or developers to renovate and resell their real estate properties. It’s also a good solution if you’re facing foreclosure since they are issued quickly.
There’s a variety of hard money loans such as:
- Commercial Property Loans
- Construction Loans
- Fix & Flip Financing Loans
- Cross-Collateral Blanket Loans, and a few more.
Pros of Hard Money Loans:
- Hard money loans give you flexible loan terms during negotiations since they don’t follow the same regulations as conventional loans.
- Hard money loans are quick to process and you get your funds in no time.
- You don’t need a solid credit score to secure a hard money loan for your investment properties in Baltimore.
- Hard loans are more expensive (interest rates) when compared to other loans.
- Before you secure a hard money loan, you must have some significant assets.
Bridge loans hold some similarities with hard money loans. A bridge loan is a short-term loan investors use to secure new properties while waiting for a current property to sell on the market. It works great for fix and flip investors and allows you to pay for a new property immediately. You get peace of mind and extra time while you wait for your property to sell off.
- Bridge loans offer you immediate short-term funds for you to finance your new investment properties in Baltimore before selling off old ones.
- One big con to bridge loans is their higher interest rates than other loan types.
- Plus if there’s a mortgage on the property you’re waiting to sell you have to make down payments on both loans.
Private or personal loans are those loans given by people in your circle. They could be your family members, friends, or private investors. If you’re looking to finance your investment properties in Baltimore and you have people in your life with the means to help, then a private loan is a great option. Flexible and with little to no interest on your loans, private/personal loans could be a lifesaver for your real estate business.
- There’s no requirement for a credit or background check since the lenders know you personally, so you get easier approval on loans.
- There’s little to no interest when it comes to private/personal loans since they usually come from a place of compassion rather than profit gain.
- Low credit scores don’t matter.
- If repayment isn’t made on time it could lead to disputes and awkward situations.
- There could also be certain tax implications involved.
- Private/personal loans will not build up your credit score since payments aren’t reported to credit bureaus.
Home Equity Line of Credit
A home equity line of credit or HELOC loan uses the difference in your home’s value and the balance of your mortgage – also known as equity – as collateral for a loan. So if you have equity in your properties or home then you can use it to secure a loan through HELOC. Another good option for you is to finance your investment properties in Baltimore.
- A HELOC loan incurs lower costs
- You can borrow relatively large amounts
- If you use the loan on your home you get potential tax breaks
- You have the safety of fixed interest rates too.
- One major disadvantage of using your home as collateral is that it reduces the amount of equity in your home.
- And if there’s a dip in the real estate market, those with these types of loans are at risk of going under.
Ready to Shop for Investment Properties in Baltimore?
As you can see there are lots of great options available to you to finance your investment properties in Baltimore. And with our investment realty agency, you are assured of transparency and accountability when it comes to approving your loans. You can trust our real estate agents to help you expand your investment portfolio.
If you’re ready to take that next step, we’re ready to take it with you. Reach out to the team at Ben Frederick Realty today to find the perfect investment property to build your portfolio.