5 ways to finance investment in real estate
Banks are the tried and tested method, but other sources of investment in real estate include credit companies, micro loans and arrangements through a private lender.
NEW YORK – As more people understand the benefits of investing in real estate, their first question often centers on financing – specifically how to get it.
Securing sufficient financing can be challenging, but various loan options are suitable for supporting a commercial real estate business.
Most people already understand the process of getting bank loans. They tend to be easier to use and are widely used. When a property is purchased on loan, the monthly installment (EMI) continues to decrease over time, while the value of the property increases. In addition, buyers can secure desirable properties with low down payments and flexible repayment periods.
Meanwhile, credit unions offer competitive interest rates and no shareholders, mostly employees on a membership basis. New investors or those in changing real estate markets can find good financing opportunities, such as prepayment flexibility.
Private loans may attract investors if an insufficient credit history makes it difficult to get a bank loan. In private loans, borrowers benefit from flexible eligibility requirements. The downside includes higher interest rates, down payment and personal collateral.
Microloans are another financing option. They usually include leniency terms and credit score requirements.
Small Business Association (SBA) loans offer higher credit limits and provide longer terms. SBA loan benefits also include a lower down payment, ability to maintain steady cash flow, and protection against balloon payments. However, they can only be used to start a real estate business - not for property investments.
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