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How to Finance Investment Property: Four Options That Can Work For You

By Thoriso Mashego

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Published: 08Jan2010
Word count: 447
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When it comes to building wealth through investment, the best and most stable option is through investment property.

An investment property is a property acquired for the express purpose of earning a return, either through rent or capital gain. Generally, the owner does not live on the property, although in many cases beginning investors might choose to live in an acquired property while completing renovations, and then sell the home for a profit.

For those looking at getting into investment properties, there are a number of different things to understand before purchasing, with the first thing being how to finance investment property.There are four typical methods of financing investment property, with the first being to seek a loan through a bank.

Loans acquired through a bank offer many advantages such as competitive interest rates and low fees, although banks might not approve a high loan to value property.

What this means is that banks generally only approve 70% or so of the appraised value of the property, leaving you to come up with the rest of the money.

This may or may not be an issue for you, depending on the amount of money you have on hand to put toward the investment.Another popular choice is going through a mortgage broker. Brokers know how to finance investment property, and have extensive experience in doing so.

Their job is to present the loan you want to different lending institutions, and find the one that offers the best interest rate. An advantage to this service is that rather than being denied by one bank and having to start all over again with a different one, the broker does the work of presenting your loan to different institutions until he or she finds one that will accept it.

There are options other than banks and lending institutions. You can also go through private lenders, who loan their private money to projects of their choosing. The fees and interest rates of private lenders are usually much higher than those of banks and other lending institutions; this means that you will have to decide if the profit you stand to make from the property is worth the additional fees.You also have the option of financing an investment property with your own money.

If in fact you have the capital to do this, this is going to be the easiest and fastest financing method.

Of course by using your own financing, you aren't building your credit score by obtaining financing and then retiring the loan through repayment.

How to finance investment property is going to depend entirely on your financial situation and the goals you have for investing in real estate.

For more information go to =>Real Estate. Dr Thoriso Mashego is a successful real estate investor/trader, an online business owner and a medical doctor with his own private practice in Cape Town South Africa.

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