Investing in Oregon real estate takes capital.
Often, first time investors start out using their own money to invest. This usually works to buy a couple of properties, but soon, most people run out of capital… This means they either have to stop buying real estate, or they have to figure out how to buy more real estate without using their own money.
In this blog post, we’ll share a number of ways you can finance your next investment property.
How to get investment property financing in Salem Oregon…
There are several ways to get money to buy an investment property in Salem. Here are some of your options:
1. Traditional Banks and Lending Institutions
One way to finance your next investment is to borrow money through a bank or lending institution. If you have good credit, and enough money for a down payment, then this can be an effective way to acquire more properties — potentially several more properties!
You’ll need to make sure that your credit score is in good shape, so be sure to pay your debts on time to demonstrate a history of good credit management. Also, be careful not to max out your credit cards, as this can negatively affect your credit score. Once you build up good credit, financial institutions will be willing to lend to you and you can go out and acquire properties. A good place to check and monitor your credit score is www.CreditKarma.com. It’s free, and it has some good information about how to improve your credit score… Just know you’re going to see quite a few ads for credit cards. Selling advertising space is how CreditKarma can keep their site free for YOU to use, which is a good thing (in my opinion).
At some point, however, your debt-to-income ratio might exceed a bank’s desire to lend to you. Also, once you have a certain number of properties financed, banks may have restrictions on making new loans to you for investment properties. When either of these happen, it’s time to turn to other sources to finance your real estate investments.
2. Self-Financing
One very clever way of financing your real estate investing is to borrow against your existing investments and use that money to buy new investments.
For example, if you own a couple of properties and they have some equity in them, why not borrow against them (by refinancing them or by taking out a home equity line of credit) and using that money to acquire more properties. This is the power of leverage at work in your investments!
Of course you’ll want to be careful that your debt servicing payments are not more than the income you earn from your new acquisitions, but there are investors who build up a large portfolio with their own credit and this self-financing strategy!
3. Private Lending
Another way to finance your real estate investment in Salem, Oregon is to use a private lender.
Private lending is when another investor lends you their money. You pay them back, just like you would pay back a bank; the only difference is: private lenders don’t always look at your credit score; they’re often more interested in the investment itself and they’ll decide how much to lend you and what interest rate to charge based on their assessment of the property.
This is a very powerful kind of financing because it’s win/win: You win by getting the money you need to do deals; the private lender wins because they want to invest in real estate, have the money to do so, but don’t have the time or desire to do the work themselves. This is a passive investment for the private lender, because you do all the work on the property.
If you are a private lender who wants to invest in real estate without the effort of doing the work yourself, be sure to connect with us at (503) 339-3209 — we can hook you up with some investors who are looking for money for their deals!
4. Hard Money Lending
When you need money, and if you don’t want to go through the typical bank-sourced lending, then you might want to borrow from a hard money lender. This source of financing tends to be short-term and more expensive, so make sure you use it for a really good deal that you can either sell or refinance in a short period of time. This type of financing can often fund pretty fast, so if a really good deal may get away, it may be worth it to use this financing to get that good deal.
There are many hard money lenders out there, but not all lenders are the same. Some will only lend to certain types of deals or in certain states; others will only lend a certain amount of money. So you may need to hunt around a bit to find the right hard money lender for your situation.
Share all of your information with them and help them understand why you think this is a good opportunity, what you plan to do with the money, how you plan to pay the money back, and how you plan to benefit overall from the project. Remember: hard money lenders are investors too, so they need to see that THEY will get a return for the money they’re lending, just as you’re thinking about getting a return on the investment. Help the lender see this from their perspective.
5. Seller Financing
Another great way to finance real estate investments is to use seller financing. It has become a bit more difficult with new federal regulations… but it can be done.
Seller financing is simply where the seller takes ongoing payments from the buyer until it’s all paid off…. instead of getting a lump sum for the property. If it’s a rental or investment property, this way of selling can have great tax advantages for the seller. The seller should check with an experienced CPA (Certified Public Accountant), who can review their situation and offer advice.
New investors are sometimes surprised that this method even exists, but sellers like it. They get the cash flow without the headache of property ownership. Plus, their risk is minimized. If you fail to pay, the title of the property reverts back to the seller. This is another kind of win/win deal.
How will you finance your next Salem real estate investment?
With so many options to choose from, how will you finance your next real estate investment? Choose from the powerful financing strategies in this article. Mix-and-match them for the best results!