Posts Tagged Financial Institutions

How to Finance an Investment Property

The secret in real estate business is to use other people’s money. This is how most real estate tycoons are made. Unlike traditional residential real estate mortgages, real estate financing offers much broader financial options, including lending or financing from various financial institutions. Transactions like these call for above-average negotiation skills.

It’s not advisable to invest your own money in a real estate as for a few very important reasons. First, you you tend to give most of your profits away by not leveraging your investment. Second, real estate is a very risky business – you don’t want to jeopardize everything you have.

This is not to say that real estate investment is all about losses. On the contrary. if you know how to make money work for you, you may actually garner a great deal of money in return for your investment.

Here’s how:

If, for example, you purchase a $100,000 property that increases an average of 7 percent per year (in reality that number could be higher or lower), you would see a net profit from renting your property resulting in an approximately 15 percent return.

If you’re content with little return of investment, you might settle with your 15 percent return. But if you really want to earn on your investment, consider the possibility of what leveraging can do for you. At present, a typical real estate investor can find financing as high as 95 to 97 percent of the purchase price. There even some instances where you may be able to get a 100 percent financing but we won’t use this for our example as it’s an inadequate comparison.

So, if you’re are an investor who is already content with a smallreturn of investment then 15 percent sounds like a lot. But for those who really want to make it big in the real estate, 15 percent is far from being considered a noteworthy return.

How does leveraging work?

Let’s assume that the rental income will cover all your expenses, including the mortgage payments. Taking the same example, a 7 percent appreciation of your property results in a $7,000 profit per year. With a 95% financing in place, you’ll be able to get a $7,000 return on $5,000 (your 5 percent down payment on a $100,000 real estate property). This will provide you with a 140 percent return on your investment. Not only that, with the same $100,000 you can go out and purchase 20 investment properties, finance 95% percent of them, and make an amazing $140,000 profit a year. This totally beats the $15,000 profit with an all-cash transaction.

In terms of the additional 20 properties, expect to have a hard time getting financing for them since usually only five or six new rental property mortgages are the maximum that lenders presently allow. Which is why you need to have an above-average negotiation skills.


By: Stu Pearson

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Home Equity Loans – Helping People in Making Their Dream Homes

College graduates can lavishly spend the money earned during the first year of their jobs but in the next couple of years, they will to save money to get their dream home. Low salary and rising expenses are the two poles of the earth which can never meet each other. However, there has to be a way out.

Financial companies are collaborating with real state companies, so that they can make housing loans more affordable. India is a developing country and its economy is increasing day-by-day. Many banks are providing flexible housing loans to people, so that they can live in their dream houses.

Housing loans have got various names in the financial market like home equity loans, house loans, home loans etc. These home equity loans are always in a great demand as these are the most important needs of people. Such loans are also known as lifetime loans as most of the people take these once in their lives. These days, getting home loans have become almost easy. Whoever has got a good job with a handsome salary, can definitely go for the housing loans.

Of course, people can get the home loans after applying them but there are many benefits of these loans which all people should know. Going for a housing loans means getting a rebate from high tax payments. The Indian government has issued laws which quote that people taking housing loans would have to pay less tax from their yearly income and it has to be abided by all the financial institutions offering such housing loans. When the government of India has raised the green flag for tax exemption on housing loans, then people can take these loans from any well reputed bank.

What about those people who have a poor credit history? People belonging to this category can also apply for housing loans as there are many banks which even offer home finance loans to people having poor credit history. Before offering such loans, most of the banks review these people’s credit history and if these people score well then these people would definitely get loans.

Can home equity loans be converted to business loans? Yes, home loans can be easily converted to business loans. Many banks also offer business or trading loans in the names of housing loans. So, people doing businesses or looking forward to do new businesses can arrange their required money by getting home loans. The money received from home loans can suitably be used for starting one’s own business.

Is it true that home equity loans can be applied through online procedures? Yes, it is true that with the arrival of internet facilities, people can surely apply for housing loans or any kind of loans. It is beneficial for both people as well as financial companies because through online procedure save much time. Going for home loans means people would need many clarifications. For this purpose, people can make use of the websites of various housing loans lenders which would definitely solve all their queries.


By: Jolly Bhat

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