Partnering with someone to invest in real estate allows your resources to be combined, with limited liability for each partner.
If the partnership faces losses, limited partners are liable for only their amount of capital contributions. One partner might have cash to contribute to a project and can allow you to have access to more properties for your portfolio, while the other partner may have better credit, or knowledge of investing in general. Bank financing might also be possible or less expensive once the partners’ resources are pooled.
#6: Federal Housing Administration (FHA) Loans
Because of this, the property that will be purchased must be appraised by an FHA-approved appraiser and meet certain conditions. There are also lower credit score requirements on FHA loans, and you may be able to put as little as 3.5 percent down. This makes these loans a good option for first-time buyers.
The downside is that you will pay more interest in the long run because of the lower down payment. You will also be required to pay an insurance premium upfront as well as annually.
#7: 203K Loans
A 203K loan is a loan that is used for both a home purchase and for home improvement. The loan is guaranteed by the FHA, so lenders are typically more willing to move forward with properties that they might otherwise deem a risky investment. It’s pretty easy to get approved for a 203K loan, but the process will be time-consuming because the FHA and the lender have a lot of paperwork on their ends.
Keep in mind that the project has to be completed in 6 months. Also, you must pay an upfront mortgage insurance premium plus an ongoing monthly payment. However, 203K loans tend to have pretty fair interest rates compared to other loans.
#8: Conventional Loans
A conventional loan is obtained through a financial institution without any backing from the government. They require less paperwork than government insured loans and can be obtained more quickly. Qualifying for a conventional loan is a little bit more difficult and usually requires a higher credit score.
With a conventional loan, a higher down payment is required, which allows equity to build up faster on the property. There may also be an option to pay insurance and taxes upfront, rather than adding it to each monthly payment. On the other hand, closing costs can’t be rolled into mortgage payments.
Investors use commercial loans for business purposes to fund capital expenditures, or business costs they aren’t able to afford. Arrangement between a financial institution and a business and is usually used to help with short-term needs, like operational costs.
These loans do rely on creditworthiness, and the interest rate to be expected is the prime lending rate at the time the loan is issued. There is a pretty high down payment required for commercial loans, which is usually between 20-30%mercial loans can be for varying time periods, whether it be 3 years or less, or between 5 – 20 years.
#10: 401K Retirement Fund Loan
Some employer-sponsored retirement plans may offer loans called 401K Retirement Fund Loans. These are split between general loans and principal residence loans. General loans can be taken for 5 years for any reason. Principal residence loans are usually for under 10 years and are used to purchase a home you intend to live in full-time
Interest on 401K Retirement Fund Loans is usually one or two percent higher than the prime rate, but the interest you pay goes back to your 401K. Watch out, because most plans charge a 10% penalty if you lose your job and don’t repay the loan in 90 days.