Cash may not always be the best option for real estate investments, and great deals may come along when cash isn’t an option. However, having advanced awareness of your options provides you with the confidence you need to move on these hot properties and create sound financing strategies. Then, with the resources for additional funds in your pocket, you can take advantage of the benefits of making a cash offer in the seller’s eyes.
With an understanding of your options and a system in place for financing, your portfolio will expand as your business grows and you build a team for success. As your investments grow, you can tap into additional resources as your credit standing changes. In addition, effective scaling of your investment business will eventually make hiring property managers feasible while you enjoy the freedom of earning passive income.
Read on as we explore these five financing tips for real estate investors in Chicago.
Our first financing tip for real estate investors in Chicago is to put a minimum of 20 percent down, preferably 25 percent. Mortgage insurance isn’t available for investment properties if you seek traditional financing. However, as you’ll have more at stake and therefore provide the lender more security, the odds are in their favor that you’ll repay the loan as agreed. Additionally, just as a high credit score holds value to a lender, the more you have invested as a down, the better the interest rate the lender will offer. If you don’t have the down, you’ll need to use non-traditional resources to provide the funds. Just remember, the lender will have qualifications for acceptable down sources, such as well-documented gift funds or from an inheritance.
Loan qualifications have become more challenging for buyers, and many sellers decide it is financially advantageous to agree. So, our next financing tip for real estate investors in Chicago is to consider approaching sellers about seller financing. When you do so, you should be prepared to provide your plan for the terms in your agreement. You should also be able to provide proof of your ability to make the down payment, monthly rent payments, and the extra monthly payment that applies towards the down. Typically, you’ll pay a higher than market value for the property and agree to lose all monies paid towards the down if you fail to meet the contract terms.
Private money lenders have the funds available to provide directly to real estate investors, which is the next of our financing tips for real estate investors in Chicago. These loans, being private, are much faster to attain and more accessible than more traditional lending options as they do not fall under any predetermined qualification guidelines. In addition, you may find private money lenders among family, friends, colleagues, or others in your sphere of influence who prefer to take the risk and earn high returns.
Refinance Primary Residence
With the current low-interest rates, financing tips for real estate investors in Chicago must include exploring refinancing your primary residence. For example, a cash-out would create a new mortgage that is greater in value than the old mortgage, with the difference provided to you in cash.
The next of our financing tips for real estate investors in Chicago is to take advantage of a self-directed individual retirement account. With the freedom to invest in almost any asset, under specific guidelines, investors often take advantage of this vehicle to invest in real estate. However, be sure to research any fees and expenses that could affect the bottom line of your returns on the investment.
Tapping into existing home equity is another of our financing tips for real estate investors in Chicago. Whether you select a home equity loan or line of credit, which you can use much like a checking account, with good credit, the current interest rates make this option tempting for many homeowners ready to invest in their future through real estate.
We know you may have concerns about financing, and Chicago Home Buyers is ready to help you with even more financing tips for real estate investors in Chicago, from beginners to large-scale investors. We are happy to answer any questions you may have at Chicago Home Buyers; we understand the importance of taking the time to listen. At Chicago Home Buyers, you’ll be working with the most highly sought-after professional investors, experienced with even more creative options that will allow you to find the best properties available in Chicago. Why not get started right now; ask about our current inventory of the best investment properties available to find the right one for your investment strategy. At Chicago Home Buyers, when you work with our professional investors, backing them is our full-service team who can manage every task, big or small. Contact Chicago Home Buyers today at (312) 300-2043.