It can be scary to put together the initial funds to finance your entry into the real estate investing sector, but there are solutions to reduce difficulties and stress. Let’s look at 5 ways to finance your first investment property in Pasadena to help you feel more comfortable and confident as you take your initial steps towards real estate investing.
Traditional Mortgage
It shouldn’t come as a surprise that you have the option of applying for a standard house loan at a large financial institution or mortgage lender to finance your first investment property in Pasadena.
Several factors will affect each mortgage’s terms and conditions, such as whether you currently own your primary house, your income, your obligations, and your credit score. Do take both fixed-rate and adjustable-rate mortgages into consideration when deciding which kind of mortgage you want to get.
While adjustable rate mortgages (ARMs) can offer lower rates if your aim is to buy the property for speedy resale, fixed-rate mortgages will undoubtedly benefit an investor intending to hold on to a property for the long haul. Understanding when higher rates start to apply is essential to getting the most out of an ARM because adjustable rates can vary as frequently as monthly.
Leverage Existing Equity
Consider opening a home equity line of credit, or HELOC, with a bank or lender if you already own property. When buying your first investment property in Pasadena, you might be able to borrow up to 80 or 90% of the value of your current home.
The interest rates on a HELOC will nearly always be higher than those on a standard mortgage, but this HELOC can also be used as a more long-term source of funding in the future. Always check the fine print of a HELOC to ensure that you are not put in a precarious legal situation if the money can only be applied to your own primary residence.
Seller Financing
A formal rent-to-own agreement between the buyer and seller of a property is something that has grown in popularity over the past few years. Both the buyer and the seller have the opportunity to engage in vigorous negotiation up until they feel the terms are fair to both parties.
To provide both the buyer and the seller with the necessary legal protections, this procedure must however involve a real estate law expert. These days, the contract stipulating that the buyer will buy the property from the seller within a certain timeframe is the more typical type of seller financing that we see.
The price of the property is either an exact amount of money stated in the contract or the appraised value when the period of time is up.
Specialized FHA Loan
An FHA 203k loan is a less-used potential option. These loans are available to buyers of fixer-uppers, and they frequently cover both the purchase price of the home and the cost of some necessary repairs.
A 203k allows for low down payments and has decreased credit score requirements. Since this is an FHA loan, you would be required to live on the property for a certain period of time, which may be difficult for your first investment property in Pasadena. But if you’re already planning to live on the premises, this could be an extremely attractive option.
Find Outside Investors
Finally, to purchase a first investment property, there is always the possibility of hunting down capital from third parties willing to trust you with their investment.
Having outside investors might provide you complete autonomy or result in relentless micromanagement of your every action. Take this into account when choosing your operating model, and make sure to meet with any investors to go over the specifics you have worked out before signing anything.
Help Finding Your First Investment Property in Pasadena
Call (713) 766-0442 right away if you need assistance with buying your first investment property in Pasadena!