Notice: Trying to access array offset on value of type null in /home/iinp/public_html/wp-content/plugins/really-simple-facebook-twitter-share-buttons/really-simple-facebook-twitter-share-buttons.php on line 318
Some additional creative financing tips
While there are some obvious and creative ways to finance any property investment renovation project, consider these tried and true options as we head into this new year. Any form of financing that offers using other people’s money (OPM) to create a deferred form of payment for you as a property investor, is a great way of creating more leverage as you upgrade and improve your investment property. Adding market value with financing leverage is an excellent way of increasing your overall return on investment (ROI) for any rental property.
When first acquiring an investment property, try using an FHA loan. Most FHA loans require owner-occupancy. And this can be accomplished if you plan on purchasing a multi-family home, and plan on living in one of the units as an owner-occupying landlord. Chase Mortgage, for example, offers FHA loans as part of their mortgage portfolio. To see if you qualify for any type of mortgage, try using a home loan calculator provided by the lender. Or use one of the mortgage calculators included here, on our site, specifically for property investors.
FHA 203K loans
If you don’t plan on becoming an owner-occupied landlord, consider a Homestyle Renovation Loan, also known as the FHA 203K renovation loan. This style of mortgage can be taken out when you want to expressly bundle all the fix-up costs on a prospective investment property , and roll them into the entire mortgage on the property when you first buy it. The Homestyle Renovation Loan is offered through Fannie Mae (FNMA), and allows investors to roll their renovation expenses dire4dtly into the overall mortgage loan on the property. And you don’t need to live on site either.
The increased use of leverage using this particular mortgage product is excellent for property investing. Save your cash funds, and utilize the lenders money to finance expensive renovation costs that will invariably boost the marketability and market value of any investment property –whether you intend it as a hold ‘em rental property or a flipping opportunity. In addition, this will open up the use of your personal capital for other projects that may come up in the near future. The 203K loan can be used on any house, multi-family (under 5 units), townhome or condo renovation project. And more importantly, it can utilized no matter the existing condition of the property. Mortgages of this variety carry loan to value ratios in the fifty to seventy-five percent range, all depending on the property.
Property leverage advantages
This type of loan is great news for investors who really want to leverage properties. Instead of sinking a great deal of your available cash into renovation costs, you can now wrap a large portion of those renovation costs into the mortgage. This frees up your other capital for purchasing other investment properties. It’s also a great way of saving your untapped capital for emergencies that may crop up – emergencies that will require quick infusions of your own funds on any given investment property you acquire.This Fannie Mae Homestyle Renovation loan can be used to purchase basically any house, condo or townhome, or multifamily property. And the property can be in any condition, and loans will typically carry loan to value ratios in the 50 to 75% range, depending on the property.
Use building supply store credit
Another tip for financing investment property renovations is to use building supply store credit. Consider obtaining as large a credit line as possible when opening a Home Depot credit card, for example. Lowes is another great building supply store to open a credit line with as well. Many times these stores offer great discounts or zero percent financing for extended periods when utilizing their store based credit cards on purchases made in their stores. I have used each for whole kitchen remodels, and they are great sources of other people’s money. Besides that, you can also take advantage of kitchen and bath design services for any remodeling/renovation project. And there is no cost to use their service. Finally, these home building supply chains offer deep discounts on appliances for your renovations. And if you’re trying to outfit new kitchens on a multifamily property, and need to purchase multiple sets of appliances, these stores will offer tremendous savings for bulk buys on appliances as well.
photos courtesy of ml-explode.com, shouldersofgiantmidgets.blogspot.com, kwcommercialsa.com, infrawindow.com