The hunt for new investments is always exciting, with endless options, opportunities, and properties to look at! After hitting the refresh button you see it, the perfect investment! Maybe it’s a flip in need of a few minor upgrades, or the rental property you have been looking for to start making a passive income. You call the realtor and tell them you need to see this property immediately! With the perfect investment in your grasp, you stop to think, who has the best real estate loans for this investment?
Investors are always looking for the best, whether it’s properties or loan options for their investments. This guide has everything you need to make better investments, and to help you pick the right real estate loans!
Conventional Loan Options
Traditional lenders offer loans with low rates, and longer terms, but are not risk-free options. They offer traditional mortgages, home equity loans, or even business loans for real estate investing. Each of these real estate loans has stipulations attached.
To Apply For A Conventional Loan You Need The Following:
- Good Credit Scores
- Down Payments (From 10-20%)
- Steady Income
- Stable Employment History
- Solid Business Plans
The first of conventional real estate loan options is a standard mortgage. Depending on the length you choose, it will offer the lowest rates, lowest monthly payments. Mortgages are not ideal for those that are looking to flip a property, as they take longer to approve and only cover the purchase of a property. Those looking to rent may find that the low rates work best for a long-term rental. Mortgage rates are dependent on the term of your mortgage (15 or 30 years), and your credit score. Those with higher credit scores will see the lowest rates.
Another traditional option for investors looking for real estate loans is a home equity loan. If you currently own a home, you can borrow against that equity to finance your real estate investment. Home Equity Loans when used for investing are meant for returns to exceed the cost of a home equity loan. This loan uses your home as collateral for your loan, so it makes sure your finances and investment plan is in order. Interest rates can range from 3.5% – 9.25% while closing costs can range 2% – 5% for the loan.
Lastly, you can also apply for a small business or real estate loan. This will require a business plan for your investment, profit margins, and detailed steps to make a return. Traditional lenders want to lend on risk-averse options. So having a low-risk profile is key top using a traditional lender. That means a clean credit history, assets, and equity in return for real estate loans.
Hard Money And Private Money Real Estate Loans
A great real estate investor knows that there are endless options for real estate loans. Hard money lenders and private money lenders offer asset-based loans for investors looking for flexible options. Hard money lenders and private money lenders offer loans for the value of the real estate property or asset. Using the value or even after repair value of a property, they can offer quick loans to cover the purchase and repair of a property.
To Apply For A Hard Money Loans You Need The Following:
- Purchase Price
- Loan Amount
- Property Plan
- Rehab Budget
- Estimated ARV
With an asset-based loan, hard money and private money lenders remove the need for credit checks, income history, and employment history. They value the property and can approve your loan in 12 hours or less, and can even fund a property in 1-2 days after it is approved. When using hard money for your real estate loans you can expect to see shorter terms and higher interest rates. Interest rates can vary from 10 – 16%, while term lengths span from 1–2 years.
Hard money lenders offer many different real estate loans perfect for investing. These are bridge loans, fix and flip loans, and real estate rehab loans, which we cover below!
Fix And Flip Loans
More real estate investors are jumping into this house flipping than ever before. ATTOM Data Solutions announced that the house flipping rate increased to a 14-year high with over 53,705 homes in the United States were flipped in the first quarter of 2020.
More investors are looking for the right real estate loans for house flipping. They are turning to fix and flip loans and hard money lenders to get the funds they need. Fix and flip loans are used to purchase, repair, and sell real estate investments. House flippers use these real estate loans to get quick funds for their investments with more flexible terms and rates.
Fix and flip loans use the after repair value of a property to determine the value of a loan. Funding the purchase, repair, and flip of a property with one loan. These loans can approve in as little as 12 hours, and fund in 1–2 days, after approval. These loans can approve for up to 90% of the ARV and can require a down payment of at least 10%. Some fix and flip loans also require a 1st position lien and points on the loan. These can vary by lender, state, and property.
Investors continue to use fix and flip loans as for their real estate loans as they are flexible and fast to fund. With less stringent lending requirements fix and flip loans make it easy to get investments funded.
Real Estate Rehab Loans
Finding a real estate rehab loan can be as easy as calling your local hard money lender. These real estate loans are used by investors to complete renovation projects, spruce up listings, and can be used for buy and hold properties. Another type of hard money loan that is made for investing, rehab loans fund one-time repairs. Using the underlying value of your investment to fund repairs or to upgrade investments, such as rentals or flips.
Real estate rehab loans use the value of the asset, they can fund quickly and can even approve the same day. Making them competitive real estate loans for those looking to seal a deal.
These loans can be approved in as little as 12 hours, and fund in 1–2 days, after approval. Terms vary on lender, property, and state, but generally require a downpayment of 10% or more. Your real estate rehab loan can vary on the ARV and amount of repairs needed. You can get a free rehab valuator for your investment here!
Some real estate loans are used to prevent foreclosures or to fill gaps in funding. For these special cases, real estate investors use bridge loans, a type of hard money loan.
For real estate investors, this loan can keep projects on timelines, and get them completed by injecting some cash into a project, by preventing foreclosure, and funding repairs. This real estate loan is meant to bridge the gap in funding so a property can be refinanced or sold.
Hard money lenders offer bridge loans to help investors close deals quickly, fund rehab projects, and rescue investments from foreclosure. Regardless of the purpose, all hard money loans offer fast approvals and are based on asset values.
Bridge loan terms can vary, from loan values up to 90% based on the asset, with interest rates starting at 10% and short loan terms. You can learn more about bridge loans here.
Real Estate Loan Summary
When you have the perfect real estate investment, you can’t afford to wait for funding. That is why it’s important to work with the lenders who will offer you the best turnaround, rates, and flexibility for your real estate loans.
In our guide, we covered the best real estate loan options for your investing needs!
The Best Real Estate Loans For Your Investments:
- Conventional Loan Options: Traditional lenders offer loans with low rates, and longer terms, but slow turnaround rates. Some traditional loan options are mortgages, home equity loans, or small business loans.
- Hard Money And Private Money Real Estate Loans: Hard money lenders and private money lenders offer loans for the value of the real estate property or asset. They offer fast turnarounds, but higher rates and shorter terms.
- Fix And Flip Loans: The favorite for investors looking to buy, repair, and sell a property quickly. These real estate loans are perfect for house flipping.
- Real Estate Rehab Loans: Ideal for investors looking to repair a rental, buy and hold property, or who just need funds for repairs. This real estate rehab loan is fast to fund and can cover the cost of all the repairs of an investment.
- Bridge Loans: For investors need a quick injection of funds, for repairs, preventing foreclosure, or more. This loan is fast to fund making it an investor’s top choice for covering funding gaps.