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How to Borrow Money for an Investment in Real Estate

Investing in real estate often requires you to borrow money to make a purchase, but the process of borrowing money for investment property differs from that of traditional mortgage lending. If you plan on getting involved in this type of investment, you may have to look for some alternative means of investment if you want to overcome the hurdles that come with financing an investment property. Besides finding the right property, this is one of the most important factors in the process.

Instructions

  1. Apply for a mortgage with a traditional lender. When financing a rental property with a traditional mortgage, you may need to put up a larger down payment than normal. Some lenders require you to come up with at least 20 percent down for rental properties. You will also need to have a high credit score and a steady income to qualify for this type of loan.
  2. Work with a “hard money” lender to get access to the money you need. Hard money lenders regularly lend money to individuals who have low income or a bad credit score. When you use a hard money loan, you will pay a higher interest rate than what you would normally pay with a traditional mortgage.
  3. Use a home-equity loan to get money for the investment property. If you are a homeowner with a large amount of equity, you could potentially borrow against this equity and use the money to buy an investment property. To qualify for a home-equity loan, you will need a strong credit history and enough income to pay back the loan. Some lenders also require you to have a certain amount of assets on hand.
  4. Find investors to work with you on this investment project. Create an investment proposal and show it to your friends and family members. Some may be willing to give you money to purchase the property. This may be combined with a loan, in some cases. The investors could help you come up with the money you need for a down payment.