One of the biggest challenges that real estate investors struggle with is funding their deals. There are many options to gain capital to finance real estate investment properties, however, not all investors are able to qualify for these options. The most traditional way of getting money to purchase an investment property is through a financial institution. Many banks are willing to lend money to you based on factors such as your credit score, tax documents, bank statements, and income. Yet, traditional banks are sometimes on the fence about lending for investment properties and would much rather finance a personal residence. They see investment properties as a risk and are not always comfortable taking chances on those properties. In addition to this, lending from traditional banks can often take much too long to make a fast closing deal work out.This problem has sought investors to target the smaller community banks, credit unions or portfolio lenders. Portfolio lenders are lenders who are open to financing more than 5 investment properties for investors. These banks are much more open to lending on investment properties, whether it's through a traditional 30 year mortgage or a cash out refinance. While these banks can be advantageous, not all investors can qualify for lending through them. They typically require the same documents that the larger banks do and not all investors are able to supply these necessities. The next best "go to" for financing would be either a private money or hard money lender. Private money lenders are similar to portfolio lenders and can often require the same documents and standards for lending. Hard money lenders on the other hand, usually have lower standards for lending, yet they still want to make sure their cash is backed and protected. These lenders typically charge a much higher interest rate than the banks and private money lenders do, anywhere between 8 and 14% .This is n expensive convenience to take on but for some investors, it may seem like their only choice. Now, for those of you who read the title, which I'm hoping you all did, you're probably wondering what owner financing is and how it can be a real useful strategy to obtaining financing without having to jump through rings of fire. Owner financing is when the owner of the property you are looking to purchase is willing to hold a mortgage on the house just like a bank would. The owner typically doesn't require any credit to be pulled or ask for any income statements from the buyer, making it much easier to get down to brass tacks and work out a financing agreement. Now, there are no standard or set terms to owner financing deals, so you and the seller will have to come to a compromise on the full scope of the financing terms. These terms consist of the down payment, interest rate, and length of loan term. Every owner is different, so you'll have to see what their needs are and how you can help them while getting yourself a solid deal on a property you're dying to have. Not every owner will agree to owner financing, as many of them would prefer an all cash offer up front and may not have the patience or time to wait for the full principal to be paid back. However, if you can find these types of deals, and can negotiate fair terms for both you and the seller, you'll be looking at one of the easiest ways to get lending in the real estate investing world. When the banks say no, don't give up, there's always someone out there willing to play banker and collect the interest off of the property they no longer wish to keep.
