Different Types of Loans for Real Estate Investment Properties in New York

Becoming a successful real estate investor is perfect for you to start earning some passive income. However, you need money in hand if you wish to start investing in real estate. If you don’t have the cash required to purchase an investment property, you must look for a loan for real estate investment properties. You can find several different types of loans, especially when purchasing investment properties. If you select the wrong kind of loan, you may hinder the overall success of your investment. Hence, an investor must understand all the options before contacting a real estate lender. Today’s article will break down three different types of real estate loans for investment properties to help you figure out what fits your wants and needs the best. 

Fix-and-Flip Loans 

We understand that investing in a long-term real estate investment property has several advantages. However, as a professional real estate investor, you must also consider the downsides, such as dealing with bad tenants. Therefore, some real estate investors turn to the fix-and-flip investment strategy. It allows them to earn better returns all at once over a short period after selling the real estate property rather than collecting checks each month from their tenants. If you prefer this investment strategy, a fix-and-flip loan for real estate investment property is ideal. These short-term loans allow you to renovate and sell an investment property quickly. Since fix-and-flip loans are hard money loans, they are secured by real estate. You can contact a professional hard money lender when looking for such loans.  

Another option that you can consider is real estate crowdfunding platforms. It is easier to get approval for such loans as hard money loans than conventional mortgage loans. While some lenders take your income and credit score into consideration, they will primarily focus on the potential profitability of your investment property—One downside of using this type of loan is that it may be a little expensive. Depending on your lender, you might end up with an interest rate of 18%, and you will not have a lot of time to pay it back – maybe a year or even less! You will also have to pay more for closing costs when compared to other conventional financing options. 

Home Equity Loans for Investment Properties 

Using your home’s equity is a great financing option for long-term income real estate or a flip. Home equity loans for real estate investment properties are a kind of debt that allows you to borrow money against your home’s equity to purchase a second home or investment real estate. The loan depends on the difference between the property’s current value and the homeowner’s equity. Several lenders provide investors with up to 80% of their home’s total equity value!

Using this type of loan for real estate investment property comes with advantages and disadvantages. And your situation will vastly differ based on the kind of loan you go for. A real estate lender will run an appraisal and credit check on your property to determine your creditworthiness. Home equity loans provide you with an easy source of cash, and getting approval is also quite simple. Moreover, interest paid on these types of loans is also tax-deductible.  

A home equity loan for an investment property is a second mortgage, but they tend to have a higher interest rate than your first mortgage. Like with any mortgage, if a real estate investor does not pay off their loan, the lender will have the right to repossess the real estate property and sell it to satisfy any remaining debt. Moreover, if the investor defaults, the lender gets to keep all the money made from the initial mortgage and the home equity loan. Thus, a home equity loan for real estate investment property is excellent for all responsible real estate investors. 

Commercial Investment Property Loans 

If you are interested in commercial real estate investing, then the above two types are not ideal for you as they are residential investment real estate loans. A commercial investment property loan is all you need! The primary difference is that you need to have a solid business plan and a great credit score to obtain such loans. Several kinds of commercial real estate loans with specific qualifications and terms make it an excellent deal for certain types of commercial properties. When you select such a loan, you should expect to cover a down payment of 15% to 35% of the total purchase price.

At Real Estate Funding Solutions, our team has years of training and on-field experience, which enables them to give you only the best advice when looking for an investment property loan. Our team will also help you gather all the necessary documents and ensure you glide through acquiring the loan with ease. With our expertise, you will find a suitable loan term for your next real estate investment property. Call us today at +1 855-913-8637 to get started!