Financing keys to succeed in Real Estate Investing
One of the most important keys to success in any endeavor is a comprehensive, well-defined plan. As active investors ourselves, we believe the four most essential financing pointers to help you accomplish your goals in real estate are:
A) Get pre-approved for a hard money loan before searching for deals.
- Quality deals move fast. You will usually miss out on the deal if you cannot immediately send a contract along with proof of cash funds or a pre-approval from a reputable hard money lender.
- To accurately calculate the return on any investment, you must calculate the cost of funds. The lender will provide financing terms which include the interest rate, points, and fees. You will need to calculate the total fees for both short-term financing for flips, the interim, and long-term financing to calculate your ROI. At Catalyst, many of our team members and loan officers are active investors as well and will happily assist you in calculating your ROI.
- Choose the lender based on the value they provide, not just the price! Like most things in life, you get what you pay for. A few important questions to ask are:
- Is the lender also an investor? Can they provide advice on investing?
- Can they offer all products with one credit pull? Or will you need to work with many lenders?
- What is their reputation? Check online reviews! If real estate investing will be a focal point of your overall investment strategy, you should work with professionals with a proven track record of success.
B) Develop a long-term plan to take advantage of the best products to fit your needs
- Do you have a large nest egg, or do you need to build your assets through investing?
- A great way to start investing with minimal out of pocket cost is to start in the fix and flip space. Flips can be used to put money in your pocket or build more capital for buy and hold investing (Short or long-term rental of the property).
C) Develop your priority list for long-term investments.
- What’s most important to you? A fast and easy loan process or the best terms?
- Conventional loans provide the best terms but also have more requirements.
- Non-Conventional loans are more flexible and require fewer documents but have higher points and fees.
D) Protect your credit score and maximum loan access.
- Minimize credit pulls by working with lenders who offer short and long-term products with one credit pull.
- Make smart financial decisions to not adversely impact your FICO scores: Don’t miss any payments.
- Only inquire about credit or add credit if necessary and not during a loan transaction.
- Pay down revolving account balances.
- Expand credit file with quality accounts, such as installment loans, when not involved in a loan transaction.
- Borrow with one spouse per transaction if credit qualified for Conventional loans to maximize access.
Make the Investment Today
Utilize these investment tips and finance keys to maximize your success in real estate investment this year! The team at Catalyst wants to help you succeed. Contact us today or fill out a loan application. We’ll help you develop a plan and provide the financing you need to achieve your goals and accelerate your cash flow.