How to Finance Real Estate Investments

Many people want to purchase real estate as a way to make their money work, while also diversifying their investment portfolio.

So, here are some basic steps to take before purchasing an investment property, and some simple ways to finance real estate investments.

Have an Investment Plan

Before you start buying investment properties, it’s important to create an investment plan.

Some of the things you’ll want to include in your plan are:

• Your financial goals.
• Financing of investment properties.
• Cash needs to start investing in real estate.
• Criteria for choosing investment properties.
• How you will rehab properties, including using a general contractor and/or a project manager.
• Management of rental properties.
• Holding and exit strategies.

Credit Reports

When developing your investment plan, check your credit report to see if your FICO credit score is high enough to borrow the money you will need.

Check for mistakes when reviewing your credit report, and make sure you understand the components of the score. There may be simple things you can do to improve your score, and thereby save money by borrowing at a lower interest rate.

And perhaps most importantly, make sure you know how to keep your credit score as high as possible.

Create a Financial Portfolio

While in the planning stages, begin assembling a financial portfolio, which should include everything you need to conduct business with lenders and business partners.

Depending on funding sources you are considering, your financial portfolio could include:

• Business plan / real estate investing business plan.
• Business and personal bank statements.
• Business and personal tax returns.
• Information about investment accounts.
• Proof of income: pay stubs, 1099s, K-1s, etc.
• Mortgage statements.
• Driver’s license (copy).
• Explanation for each time your credit was pulled in the last year to show whether you have recently incurred new debt.

Build Relationships with Community Banks, Private Lenders, Portfolio Lenders, and Hard Money Lenders

Big banks are often the last resort for funding real estate investments. Rather, build relationships with lenders who are easier to work with when funding property investments.

Depending on your background and connections, most investors will have several options for funding real estate investments. Typically, the first lending sources you’ll want to explore are community banks, private lenders, portfolio lenders, and hard money lenders.

Rental Properties Can Pay for Themselves and Generate Cash Flow

When purchased, rehabbed, and managed correctly, rental properties pay for themselves and generate positive cash flow. Besides paying for themselves, rental property can throw off cash that may be used to purchase additional properties.

You need the initial cash to purchase the first rental property and get it on the market, but then you can typically finance the property and leverage it to help purchase additional properties, as it continues to generate cash each month.

Graystone Investment Group

Graystone is an experienced Investment Group, wholesaling properties in the Greater Tampa Bay market. Our company is designed to help new and seasoned investors.

Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.

To learn more about profitable investment real estate in Tampa Bay, fill out our Investor Profile, or contact us direct.