How to Finance Your First Real Estate Investment Property

By Mark Davis

As a resident of Fairhope for over 10 years, I love living on the Gulf Coast of Alabama. Baldwin and Mobile County have so much to offer to its residents. Living in Baldwin & Mobile Counties and being active in the local communities, I have extensive knowledge and insight into the local market conditions and trends. I am a strong communicator, skillful negotiator, and a detailed oriented agent. Bottom line, I love being a Realtor and I will always get the job done for you and keep your best interest in mind.

Do you want to invest in real estate but are unsure how to finance your first investment property? A lot of people would love to invest in real estate, but they aren’t sure what the best way to go about it is. Today, I will explain the three primary financing strategies you can choose from to determine which is best for your investment goals:

1. Conventional loans. These are traditional mortgages offered by banks and credit unions that typically require a down payment of around 20% and come with competitive interest rates. If you have good credit and can afford a substantial down payment, conventional loans provide stability and long-term affordability, making them an excellent choice for purchasing single-family homes or rental properties where a stable, predictable mortgage payment is beneficial. However, this might not be the best option if you’re looking to acquire a property quickly or have less capital upfront. The approval process can be lengthy, and the down payment requirement may be too steep for new investors.

2. Hard money loans. Unlike conventional loans, hard money loans are asset-based, meaning the property itself secures the loan rather than your creditworthiness. These loans are ideal if you’re in a rush to buy, as well as for properties needing major renovations. If you find a fixer-upper or need to act fast on a deal, hard money loans can provide the fast funding you need. However, hard money loans have higher interest rates and shorter repayment terms, making them more suitable for projects where you can quickly add value such as by making renovations on a home and then refinancing or selling the property to repay the loan. This is a great option for experienced investors who can move quickly and can manage higher risks.

3. Private lending. This involves borrowing money from individual investors or private entities rather than traditional financial institutions. Private lenders often offer more flexibility in terms and can be a great source of capital if you have a huge project or a solid relationship with the lender. This option is particularly useful for new investors who might find it challenging to secure funding from conventional sources. One key benefit of private lending is the ability to negotiate terms that work for both parties. Private lenders are usually more willing to work with new investors, especially if you have a solid investment plan and a strong network. However, because these loans are often individually negotiated, the terms can vary widely.

If you have questions about which financing options might be best for your situation or need guidance on getting started, I’m here to help. Call me at (251) 210-2913 to schedule a one-on-one consultation. I would be happy to make your real estate investment goals a reality. Talk to you soon!