So you found the perfect investment property. It’s in a great area, near great schools, and even shopping. You’ve done your thorough research and know the area will be great for a rental property. So how do you fund your new venture? Many new real estate investors don’t have the credit necessary to finance a new purchase. So what is the proper way or ways to go about closing the deal . First of all before you go down this road, you want to make sure that there is equity tied up in the property at the time of purchase. This is a great way to secure your loan without taking any undue risks. Some quick calculations should tell you how much cash you can put pull out of the deal at the time of closing.
This will help you bridge the gap between the time of closing and the deposit put down by your first renter. So now what do you do? Well there are many options that you can utilize for a short term loan. The least expensive but sometimes stressful way is to borrow from your family. Let them know that you have an investment opportunity in the works, and because of the equity tied up in the property their investment is secure. You could also help if you could give them a definite date when the entire amount will be paid off. Then it would be as simple as getting a loan against the equity right after closing to pay them back as soon as possible. If you don’t have relatives or friends with such means there are other options.
One is credit cards. I know this sounds crazy, but you can literally apply for 10 credit cards at one time and use the cash advances to fund the down payment of the property. Then as soon as you are able to pull the equity out, you pay them off very quickly, and look into merging them into one account so that you do not have too many credit cards on your credit profile. Another method is high interest short term loans provided by many reputable vendors. The interest rate is super high, but you are only utilizing this matter for a short period of time. This will give you more flexibility to just make payments for two or three months until everything is settled and then you can pay it off all at one time. This method will also be a gold star on your credit report as you’re borrowing money and paying it off very fast. No doubt these methods may seem risky and extreme, but with the proper research and homework you can utilize them for short term financing and put your new investment right in your portfolio.