Real Estate Financing
Choosing a Financing option that works best for you.
Financing is one of the most important aspects of investing real estate. An agent will offer you a few types of financing options which will establish your working budget. This choice, along with your risk tolerance, will limit the type of investment property you can purchase and the return you will receive on your investment.
Take a look at the following two financing options:
Cash financing requires paying off most or the full value of an investment property, with little to no loan provided by a lending institution. While the initial investment is high, this provides you with immediate ownership of a property and eliminates the burden of loan repayments.
This option, while having a low risk, limits your working budget to the amount of capital you choose to invest.
Traditional financing enables you to leverage your capital and purchase one or several investment properties by spreading the purchase cost over time for a set percentage of interest. Traditional lenders offer you the potential to in higher-value properties or diversify your portfolio into multiple properties.
This option does have a higher risk, but it usually results in a higher return on investment for the investor.