Beginner’s Guide to Financing an Investment Property

An investment property in Southern California can be a profitable and reliable business venture. If you’re considering acquiring a property, but it would be your first time applying for financing, here are some tips from the experts at North Coast Financial hard money lenders. They’re a funding source with more than 40 years of experience helping South California investors get their real estate projects launched.

Determine a Property’s Revenue and Income Prospects

Experienced Los Angeles hard money lenders and the investors they work with in the City of Angels understand that every property has its unique cash flow capability. This can account for a loan being approved for up to 75% of the property’s value. A building’s revenue prospects can make a difference in the type of financing you’ll need to meet your investment objectives.

A traditional bank may not approve a conventional mortgage if a property’s ownership has changed hands numerous times. While its price may have increased with each sale, certain lenders may be concerned that you may not be able to sell it for a reasonable profit.

A private lender, however, can work to streamline your portfolio so that investment losses offset your capital gains tax liability. Your profit potential can be reflected in your mortgage amortization schedule to provide a clearer roadmap of where you’re heading.

Conduct Due Diligence on Your Investment

To get started in real estate, you’ll need to conduct some due diligence, and you may find that it differs from researching other types of investments. Property due diligence requires determining how many times its title has changed ownership and giving careful consideration to how soon you can generate a profit.

Factors to research include the time it could take for:

  • Acquiring a unit from its current owner
  • Fixing or refurbishing a property
  • Appreciation in market value
  • Advertising a sale and attracting a buyer
  • Vetting a suitable tenant
  • Closing and rolling into a new investment

A building may be for sale because it’s taking the owner too long to realize a return on investment; he or she may need to unload it for income tax purposes. If you find a unit with equity, you could diversify your portfolio with a mortgage loan that provides liquid cash. The cash proceeds may be used to purchase another unit to increase your revenue streams.

Consider the Resources Necessary to Capitalize the Property

You may find a property advertised as a “fixer-upper,” but without its prior owner showing a significant profit, it may not actually be habitable. A house that recently changed ownership, for example, could indicate the owner couldn’t afford the necessary repairs to offer it as a rental. You’ll need to conduct a cost-benefit analysis to determine renovation expenses. Knowing what it would take to rent the property or draw in another investor to buy it from you can play an important role in your financing plans.  Millions of people are interesting to know about the importance of credit monitoring service for lenders.

A mortgage acquired through a hard money lender San Diego and Los Angeles investors have come to trust can enable you to grow and diversify your income-producing portfolio. Whether you’re interested in a single-family home, multi-unit dwelling or commercial building, several affordable financing options are available for beginner investors, even without an outstanding credit rating or high income level.

Related Articles

Leave a Reply

Back to top button