Different Types of Investment Loans for Real Estate Property

Aerial View of Real Estate

Do you know the different real estate investment loans? Learn more from Investor Loan Source, a top investment property lender offering loans nationwide.

Are you planning on investing in real estate? There are primarily two ways to do this, either with cash or with an investment loan. Not all real estate investors have cash on hand when starting out. Therefore, most will choose an investment loan product to fund their purchase. If you’re researching investor loans for the first time, here is a brief overview of what loans might be available to you.

Commercial Loans

These loans are available for purchase, refinance, and cash-out purposes. They are used by investors to purchase all kinds of commercial properties up to $10 mil, in most cases. Commercial loans are great for investors who qualify for traditional loans, but can also provide creative solutions for investors who need less traditional loan options. These loans are a good option for specialized land loans.

Hard Money Loans

Have you considered a conventional mortgage, but you didn’t want the typical duration that comes with a traditional mortgage product? Hard money loans work well for private real estate investors who need short-term loans. Short-term hard money loans require pay-off within 36 months, and they have generous credit score requirements. In fact, many hard money loans have no credit requirements at all. However, before going with this investment loan product, it’s important to know that the interest rates are quite a bit more to the tune of 10% more than traditional mortgage products.

Fix-and-Flip Loans

Investors who need to close fast and need private lenders for real estate investors might choose a fix-and-flip loan. These are investor loans that offer flexible solutions to fit your needs and help you make strategic purchases. Some of the advantages of these loans are they can cover up to 100% of the property purchase amount and 100% financing on rehab costs. Most fix-and-flip loans are available for single-family homes and 2-4-unit multi-family complexes. There are typically no loan minimums with a maximum loan amount of one million dollars.

FHA and VA Investment Loans

Not everyone is eligible for these investor real estate loans, but if you are, these loans are a great way to secure a rental property. FHA loan-funded properties do have strict occupancy requirements such as they must be owner-occupied the first year, and can only be rented out the following year. What makes these investments loans so attractive is their low down payments, making it easier for first-time investors to get into the market.

Rental Loans

If you don’t qualify for FHA and VA investment loans, a private rental loan is another option for investors. These loans offer the following benefits:

  • Close in as little as 10 days
  • Up to 75% LTV
  • 100% LTC
  • 5, 20, and 30-year loan options
  • Ideal for non-owner-occupied residences
  • 600 minimum credit score requirements
  • Available for 2-4 multi-unit rentals and single-family properties
  • Wrap-around loans

Novice investors often haven’t heard of this investment loan type, but it’s a great way to get a lower interest rate on an existing mortgage with a higher yield for the investor. Wrap-around loans are transactions where the lender assumes responsibility for an existing mortgage, allowing you – the investor- to sell a property on owner-finance terms while wrapping that note around the one you have with your lender. The process is often confusing to new investors, so it’s important to work with lenders who do these loans often.

If you’re looking for an investment property lender, contact Investor Loan Source today at https://ils.cash/ to learn more about available programs for seasoned and first-time investors.

Determining Fair Market Rent for Your Rental Property

For rent sign

At Investor Loan Source, we’re here to help you get the funds you need to invest in real estate. Rental properties can be an excellent source of income, and our real estate investor funding is a great way to get one or more rental properties under your belt so that you can begin collecting rent. But exactly how much should you be charging for rent anyways? This blog will help you learn how to calculate a fair rate for your rental property.

Why It’s Important to Know the FMR

The fair market rent (or FMR) is an essential piece of knowledge to have, whether you’re looking for a rental to buy, listing a vacant rental property, or adjusting your current rent charges. Ensuring that you’re charging a fair rate for rent will help you to fill your property quickly, help you keep good tenants for longer, and help you to calculate if a property is a good investment.

When listing a property, you want to ensure that the monthly rent you list is competitive. If your rent is too high, you’ll have a hard time filling the property, which means you’re left paying the expenses on a vacant property. If your rent is too low, you may fill the space quickly, but you’ll likely end up making very little on the property—if you make anything at all. The same applies to adjusting your current rent charges.

If you’re looking for a property to invest in, knowing the FMR for such a property can help you to calculate whether or not the property is a smart investment. If the FMR for that area is less than what it will cost you to run the property, it might be a good idea to invest somewhere else.

What Factors Will Impact FMR?

The FMR for any given property is impacted by many of the same factors that would impact the purchase price of the property. These include:

  • How desirable the area is to live in
  • Square footage
  • Number of bedrooms and bathrooms
  • The type of property (single-family home, townhome, apartment, etc.)
  • Age of property
  • Condition of property
  • Any additional amenities that improve the property’s desirability

Now that you have a basic understanding of what will impact your property’s FMR, let’s get into how to calculate it.

How to Calculate FMR

The first and best step to take when trying to calculate FMR is to look at comparable properties in your area to see what other landlords are charging. You should aim to find at least three properties that are as similar as possible to your own, but the more comps you find, the more accurate your rental calculation will be.

When looking at comps, keep the factors listed above in mind. If the other properties you’re looking at have additional amenities that yours doesn’t—such as being recently updated—or if they have less square footage than yours, you’ll need to adjust your calculations accordingly.

If you’re looking to invest in rental properties, contact Investor Loan Source to get a real estate investment loan. We’ll help you get the funds you need to purchase rental properties that will be a smart investment for your future.