Financing investment property is about obtaining a property for short and long term investment. Investors would either acquire a property to have it leased to generate revenue or have it renovated and sell it in a higher price.
There are three known approaches in financing investment property.
First is to use your own funds assuming that you have enough money to buy a property without any assistant from outside finance. This gives you an option of not having to go through a lot of paperwork and adhere to financing companies’ strict rules or having to discuss your every move to your partner in making decisions. You can do things freely but will be risky if you’re not being careful and will lead you to bankruptcy.
This second approach is the most common method in financing investment property wherein the investor should secure a line of credit from a local bank. This is for buying a property or payment for renovations. If you need a produce a regular income, you will be able to repay from the line of credit from the money that comes in every month. When you resell after making improvements and credit will be paid off at the time of the sale, they call it “flipping”. After it has been sold, you will find that you will have enough to do another flipping property venture.
Third strategy in financing investment property is to find one or more investors to help you with the finance. At least you will have someone to share all the expenses without having to release all your own resources. The taxes payment for renovations will be distributed at the same time you and your partner own the property. This is likely the most conventional way when having a commercial investment but this can also work with owning a residential property. If both partners have a positive working relationship, this is the easiest way in making money out of financing investment property.
All you need to have when deciding the best approach is the line of credit you have and the property you want to obtain. It is wise to understand the advantages and disadvantages when choosing from the three strategies in financing investment property, then use the one that would work best for your interest.