Chots Finance Investment

Property investment finance is the one of the first obstacles that the potential investor faces…the benefits and advantages of investing in property for wealth building purposes are quite obvious, and if no deposit lending including costs was freely available, naturally everyone would be an investor!

However this is the post Global Financial Crisis era, where banks who were happy to give you an umbrella when it was sunny are now taking it away when the rain starts to fall.

Loan to Valuation ratios (The ratio of the loan the lender is willing to advance against the value of the proposed property) have taken a step or two backwards….from the heady days of No Deposit, No LMI lending for investment purposes, we are now looking at restricted lending requiring at least 5% deposits plus costs.

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When you’re financing investment property, you need to have the best first deal. Now striking this is the hardest. Anyone who has experienced this first hand will agree.

Take for example buying a rental property. You must have the initiative in financing investment property and also understand the process that comes along with it. Don’t just sign any contract that comes your way.

You have to consider the real estate values and the area of the property you are investing in. Think of the money that you are shelling out for this investment.

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Knowing how to finance investment property can be a tricky question. The real problem is that investment properties do not work in quite the same way as your first home, and it is important to ensure that the property is going to be as profitable as possible. There are a few options when it comes to financing your new investment.

Most people who need real estate financing are in a good position as long as they can prove to the lender that the property will bring a profit and/or grow in value over the life of the loan. This means that as long as your investment property has a solid predicted return you stand a very good chance of finding quality finance options.

Most property investors use a traditional bank mortgage to finance their real estate investing. It is important to remember that banks can be less generous when it comes to first time property investors, so it helps if you have a good credit score in order to find the best interest rates on loan. If a bank loan isn’t available to you then there is always the option of finding a private investor who has cash available to fund your investment. In all cases you’ll need to put together a solid proposal and show the investment is going to pay off.

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When toying with the idea of a property investment opportunity, you have to make sure you do all your homework right out of the gate. Hands up all those who just jumped straight in and lost cash because they “thought” they knew what they was doing and didn’t listen to a professional? Ok, I see a few hands, well, more than a few.

One of the biggest mistakes people make, is in the thinking that if they buy a “lemon”, that they can make “lemonade” for pennies in renovations. Think again! Real estate investment has to be structured just like any business. You have to keep track of your bills, in-comings and outgoings and you had better have the right tools in place before you start otherwise you’ll be back in the same boat as others in losing money, could be worse, you might end up being captain of the boat if you are not careful!

Be prepared. Yes I know, an old scout cliché BUT being prepared will seriously cut your time and energy losses basically down to zero.

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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.

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