Financing Rental Properties

Financing rental properties can be done in various ways. There is the traditional way of getting loans to purchase rental properties through banking institutions.

The majority of the banking institutions will want you to have a minimum of 6 months reserves per property and you will need a fairly good credit score.

There is a limit to how many loans you can have open at all times, it varies depending on the market and economy.

Another way to finance rental properties is through your IRA. You will need to confirm that you have a self directed IRA and that the custodian will allow you to use your funds from your IRA. Purchasing properties through this avenue has many advantages; it will be bringing in extra income to your IRA and allow you to invest your retirement fund into something physically stable, they are not making any more land after all.

All expenses and income must come in and out of your IRA through your custodian and will have to be authorized by you as the beneficiary. It is a fantastic way to build up your retirement account.

There are alternatives to lender financing for rental houses, you can purchase the rental as an option to buy. In this case you negotiate a down payment and monthly payments from the owner of the property.

You will need three documents to do this, a rental agreement, a purchase agreement and a quit claim deed showing you on title. Once you sign and notarize the deed you should file it in the County recorder’s office for where the property is located.

Just a note the majority of the contracts written for options will have a nonrefundable security deposit. So be aware that if you walk away from the property at any time you may be losing your security deposit.

You can also find money for real estate investing from family, friends, and other investors. When you find someone who has liquid cash that wants a great return on their money secured by real estate you’re in the game. Let’s just face it, savings accounts, money markets, IRAs and other investment strategies just aren’t giving a great return.

You can offer your private lender a better return on their investment by financing rental properties for you. A lot of private lenders are happy with 10%, 12% or 15% return which will leave you room for profit.

Want more money than deals? How to raise money for real estate investing? Word of mouth, once your private lender starts seeing their return on your loan, they will become a great source of advertising for you, so treat them right.

You can also try fund raising, Government Grants, lines of credit, hard money lenders, small business loans, partnering with a cash partner and owner financing strategies like rent-to-own, option contracts, land trust, and land contracts. The best strategy is to let everyone know what you do and what you pay. Word of mouth is the key to your success.

So, what do you do? You got it, you’re a Real Estate Investor!

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