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There are many sources of capital for income property investing. The most obvious are traditional real estate lenders like banks, saving & loans and sellers. We cover them in some depth on our financing pages and extensively in our new Real Estate Investor Web. There are also many government programs that provide money primarily for housing construction and rehabilitation, but can also be structured to help with property purchase.
Where ever you decide to get the money, avoid the financing pitfalls that can cause you to lose in the long run.
BORROWING SAFELY
Lenders prefer high down payments with early amortization.
Which property is a lender most likely to foreclose in the event of late payments: a property where the investor has about 20% equity, or one where he only owes about 50% of the value? The answer is obvious; which is another reason (along with leverage) why professional real estate investors like to buy with low down payments and long amortization, while lenders want to achieve the opposite. The above example also illustrates why real estate investors may want to refinance when their equity gets above 40%.
None of us anticipate hard times and late mortgage payments. We struggle to avoid default at almost any cost. However, in the event of a major plant or military base closing, we want our lenders to have an incentive to help us survive the crises, not take advantage of our misfortune. Government Money There are a great many government programs that offer grants and subsidies for rental housing targeted toward, seniors, handicapped and low to moderate income tenants. Most HUD programs are now passed through to state housing authorities. Here are a number of examples.
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Community Reinvestment Act. The federal government requires that banks make loans for low to moderate income housing. Learn about the act, then go meet your local banker.
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HUD FHA Refinance Assistance. The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), provides mortgage insurance to facilitate the refinancing or purchase of rental housing that does not require substantial rehabilitation.
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VA Loans. Veterans can purchase income property with no money down, containing up to four units, if they intend to live in one of the units, using their VA loan entitlement.
Private lender money
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Bank Rate Monitor
This is one of the best financial sites on the web. The name, BankRate Monitor, covers a just a small part of what is available. Consumer financial news and the credit card comparison study are very valuable.
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The Mortgage Loan Page maintains the largest Mortgage Company Search Engine on the Internet and the only one that can be searched according to your specific Loan needs. The one stop shop for Real Estate Financing. Use the on-line search engine to find who's right for you. No matter if your looking for the lowest interest rate, the closest, or the most experienced refinance mortgage professional. They have hundreds of loan agents to choose from.
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