Rental property carries with it the certainty of a continuous and stable income source for years to come. Like any other lucrative investment or business venture, the rental property requires funding to establish it. The advantage is that there are several viable financing options for you to choose from, depending on the terms and conditions provided. Here is a list of some of the alternatives you can take advantage of to finance your rental property.
Financing your rental property from your pocket is one of the best ways to get a rental property. This option does not come with any attachments such as inflated interest rates or the use of your property as collateral. If you have enough money to finance the investment, especially if your credit score with the banks is not favorable, pick this option.
The set back with this cash is that the returns on your investment diminish. However, it remains to be the best way to cover your rental property investment.
Conventional Bank Loan
A bank loan is a good property financing option if you have a good credit score and a good income. The amount of income you get is useful to calculate the amount of interest you will pay and the payment duration.
This strategy of financing is one of the best ways to finance your rental property. It comes with very low down payment rates and a mortgage that takes up to 30 years. The benefit of this option is that the bank is responsible for paying your insurance fees and taxes. However, you have to adhere to conditions that include depositing money monthly into an account and living on the property for a year.
Seller financing is a good option for individuals who do not have a good credit score with the banks. The buyer of the rental property gets a loan from the would-be seller to buy the property. For this option to be successful, the buyer should show commitment by signing a contract and loan terms in the agreement with the seller.
Several lenders provide buyers with private funding for the property. The funding comes with interests and terms that are negotiable and flexible.
This option of financing is much faster but carries a shorter repayment period and comes with high-interest rates. Private lending is similar to a mortgage as the lender’s finances remain secured in the home.