Investing in LA real estate takes capital.
First time investors typically use their own money for their first few investments. This works well, but most people cannot grow their portfolios quickly using this method because they run out of cash. Once this happens, they have enough experience to invest with OPM (other people’s money).
In this blog post, we’ll share a number of ways that you can finance your next investment property.
How to get investment property financing in Baton Rouge LA…
There are several ways to get money to buy an investment property in Baton Rouge. Here are some of your options:
1. Traditional Banks and Lending Institutions
The most obvious way to finance your next investment is to borrow money from a bank or mortgage broker. You need good credit, steady income, and enough money for a down payment. That can be tough if you invest in real estate full time, or even if you are self employed. If you are able to use banks, you can typically get five loans before they cut you off.
Your credit score is one of the biggest factors for qualifying. There are multiple factors that go into it, but if you make your payments every month, have had credit for a long time, and have a low utilization ratio (balance vs available credit), you should have a fairly high score.
At some point, however, your debt-to-income ratio might exceed a bank’s desire to lend to you, once you have a certain number of properties under ownership. When this happens, then it’s time to turn to other sources to finance your real estate investments.
One very clever way of financing your real estate investing is to borrow against your existing investments and use that money to buy new investments. You can do this several ways.
For example, if you own a couple of properties and they have some equity in them, why not borrow against them (by refinancing them or by taking out a home equity line of credit) and using that money to acquire more properties. This is the power of leverage at work in your investments! Another option is a portfolio loan from a traditional lender like in the section above this. They will use your current investments as collateral and give you what is essentially a line of credit to acquire more properties.
You will want to be careful that your debt servicing payments are not more than the income you earn from your new acquisitions, otherwise you could lose it all, but there are investors who build up a large portfolio just with their own credit and this self-financing strategy.
3. Private Lending
Another way to finance your real estate investment in Baton Rouge is to use a private lender.
Private lending is when you use other investor’s money for your deals. People often start with friends and family, but to really grow you need to make relationships with investors who are looking for more passive returns. You pay them back, with interest, exactly like a bank, but they have different lending requirements and don’t always look at your credit score. Private lenders are more interested in the investment and base their loan amounts and interest rates on that.
This is a win/win scenario at it’s finest. The investor gets to invest in real estate without the headaches of managing properties and you get the money you need to do deals.
If you are a private lender who wants to invest in real estate without the effort of doing the work yourself, be sure to connect with us at 225-288-7209 — we can hook you up with some investors who are looking for money for their deals!
4. Seller Financing
Another great way to finance real estate investments is to use seller financing. It has become a bit more difficult with 2011’s federal regulations, but it can be done.
Seller financing is typically used when the seller has 100% equity in the property and want to sell without paying a ton of taxes. They accept monthly payments from you, like a normal loan to spread the gains out over many years.
“Newbie investors” are sometimes surprised that this method even exists but sellers like it because they get the cash flow without the headache of property ownership (plus their risk is minimized because if you fail to pay, the title of the property reverts back to them). This is another win/win deal. They only lose out if you pay them off early, then they have to deal with the tax consequences.
How will you finance your next Baton Rouge real estate investment?
With so many options to choose from, how will you finance your next real estate investment? Choose from these four powerful financing strategies and mix-and-match them for the best result for you!
If you’re eager to invest and just need deals or money to help you get going, just click the link below and fill out the short form to get started. We’d love to help you build your investment portfolio!