Here are 5 ideas for financing your rental property, and helping you get started in the property rental business. These tips can help to finance the property you are interested in leasing, as a landlord one day. The common means of finance involve credit unions, banks, and mortgage companies to obtain a home loan. However, approvals require credit scores in the high 600s, and a minimum 10% down payment, or higher. And as the number of your rental properties increases, bank loans can become harder to come by. Some companies may even require proof of additional savings, as proof of collateral.
So, the most important consideration is how to procure financing for your first rental property. More importantly, you can finance additional properties to grow your portfolio. Read on to explore some non-traditional financing methods, and grow your rental property business, in South Florida.
Borrowing Against Equity For Financing A Property
Using current equity is not the most non-traditional idea for financing your rental property. However, borrowing against a home you own in Florida, is a quick and easy fix. It can easily allow you to purchase another rental property, and get your business underway. Undoubtedly, it is a good strategy if the purchase does not require a sizeable down payment. And it comes in handy as a bridging strategy to increase the number of properties in your portfolio.
In simple terms, home equity is the fair market value of your home, less the outstanding lease or mortgage on it. So, if your home is worth $400,000 with an outstanding amount of $150,000, you can be eligible to use $250,000 as available equity to finance an additional property. Understandably, using current equity is not the most non-traditional idea for financing your rental property, but it can help.
Lease Option For Financing Your Rental Property
The lease option allows you to get into a property with little or no down payment in Pembroke Pines, South Florida. And is a popular and creative financing option for just this reason, allowing you to buy the property a few years down the road. In five years or so, when you are ready to make the payment, you will have ample time to get your affairs in order and obtain the necessary financing.
Cash-out Refinancing For Rental Properties.
Cash-out refinancing involves taking out a mortgage amount, exceeding the previous mortgage balance. And the difference is paid out to you in cash. However, borrowers usually end up paying a higher interest rate or points in this situation. in comparison to a rate and term financing option, with a fixed mortgage amount. The lender will determine how much cash you will receive with cash-out refinance, based on your credit profile. And your property’s LTV ratio, that is the loan-to-value ratio.
But a word of caution here! The cash will not be provided to you immediately. The required approvals, processing, and closing process may take several weeks. And besides, the loan terms may also change during this timeframe.
Investing With Partners For Financing Your Rental Property.
Going in with a partner, or multiple partners can be a good idea for financing your rental property. Partners from within the property business can bring in additional funding, and sound industry expertise. Other partnership choices can include family members, business colleagues, or friends. But pick your partner(s) wisely, as it does involve entering into business with another person. Apart from sharing control of the business, you have to also consider the element of risk involved in bringing in a stranger.
Partnership can greatly increase the liquidity at your disposal, and you potentially purchase multiple properties to grow your portfolio. Accessing funds is also significantly easier, without the layers of documentation, approvals, processing, and disbursement of funds. Obviously, this is a good option if you need funds in a hurry and cannot wait for lengthy approvals. But it does come with some risks!
How we can help?
Once you plan to get into the rental property business in Pembroke Pines, contact us for all your property management needs. Real Property Management Premier provides professional, trustworthy property management services, from tenant screening to leasing to maintenance to evictions. Whether you are an investor with multiple rental properties or have a single rental, we have the services and solutions to increase the bottom line of your Florida rental property. Follow our expert tips to increase the bottom line of your Florida rental property.
Call us today to find out more.
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