We buy houses in Pomona California. Popular TV shows make investing in real estate with guaranteed profits seem trivial. What these shows don’t show you are the tribulations that investors have to go through in securing and rehabilitating assets behind the scenes. We are homebuyers in CA and use these three smart financing strategies for an investment property in Pomona to reduce your stress and improve the chances of profitability if you are new to buying a real estate investment property.
3 Smart Financing Strategies For An Investment Property In Pomona CA
1. Consider Financing That Includes Rehab Costs In California
Most investment properties require some degree of fixing. Even if you buy the property to rent out, most likely there will be stuff you need to do to prepare the property for rent. Highly distressed properties may require complete gutting and reconstruction.
Consider all rehabilitation costs in your budget. Include the estimation of a contractor for the cost of remodeling the property if the cost is substantial. Search for a mortgage lender to finance mortgages that include costs of construction. This is achieved by some smaller, niche-specific lenders. Even the FHA has a lending program that includes building costs as part of a full mortgage.
Securing loans with these costs not only helps to ensure that you have the money to fix the property; it also holds the whole mortgage under one note. Typically with more stable installments, it holds interest rates lower. It’s better to keep your own cash in hand whenever possible.
2. Make A Large Down Payment To The Pomona Property
This may sound like a no-brainer, but many new investors think they can go down 0 to 5 percent in a property. While some lenders may be willing to extend credit for these terms on investment property, the rates are generally higher and are only available to experienced buyers with track records and other resources to fund the property.
When financial hardships arise, creditors perceive investment properties as the first place that an individual can “let go” of assets. Simply put, if you had serious financial problems, you would most likely continue to make payments on your home and stop payments on investment properties. It makes the foreclosure of investment properties higher risks, making it imperative to come in with 20 percent or more.
Many banks will not only require at least 20 percent of investment property but the more you put down, the more attractive the terms of interest and loan are. Of course, you still need to have enough cash and investments to cover your own personal finances and be able to rent or sell the property.
Smart investors also use their own home credit line to make a large down payment and then refinance the equity line on the new property, paying off their own HELOC. This is debt financing and growing practice for investors in real estate.
3. Ask For Owner Financing In CA
Owner funding is an investment strategy that is not always considered. It has become common practice for buyers to receive a loan through a financial institution with loans promoted by each financial institution. Historically, however, property sales were often sponsored by owners.
You could find great investment properties where owners are willing to fund the transaction. A scenario where an owner has the property free of a mortgage but wants to downsize or probably inherited the property could be a circumstance where the financing of the owner is a very viable option.
Whether the owner is willing to finance is always wise to ask. The structure is usually a short-term loan for a fixed period of time with a moderate down payment and monthly payments. These are great deals, but it can be difficult to get through.
Sell My House In Pomona CA
If you think you need to sell your house in CA, call Premier Property Buyers. We are Pomona home buyers who offer cash for houses in California. We would be happy to help you!