Completing the purchase of a first investment property is a big reward for investors who have spent months researching for the right opportunity. A person who is still trying to find funds to make a purchase could be in a deadlock and going nowhere fast. Experienced investors know how to find money to complete purchases.
This list of 5 financial sources available when buying an investment property is created to help first timers get the cash needed to complete a purchase this year.
1. Home Equity Loans
Most investors who are approaching retirement or already at retirement age have built up equity inside of their homes. Lending institutions offer favorable rates for most home equity loans and the interest is usually tax deductible. Taking out a home equity loan could be one financial resource a person to explore when gathering money for a down payment or purchase of an investment property.
2. Retirement Accounts
IRA, 401(k), self-directed IRA and other retirement savings plans could be one strategy used for applying cash towards the purchase of an investment home. The IRS has strict regulations about how money can be withdrawn and applied towards other investments when tapping retirement accounts for real estate. There can be tax advantages to using retirement income and it is often best to speak with a financial advisor before withdrawals are made.
3. Private Investors
Performing research on a property that appears to be a promising investment could gather enough information to attract private investors to help fund a purchase. With most types of investments garnering investors under 5 percent annual returns, an investment into real estate could be lucrative to a person ready to partially fund a purchase. Private investors can be found through networking, real estate clubs or crowdsourcing websites online.
Many first time investors try to compete in the real estate investment industry although lack of experience can be one blockade preventing a successful property purchase. Partnering with a person who has purchased homes before could provide a kickstart to a fledgling real estate investing business. Creating a partnership with a more experienced investor provides new methods of learning and could help offset the purchase of a first property.
5. Personal Savings
Dipping into personal funds is usually the last resort that investors use to gathering a down payment or purchase price of a property. Combining one or more financial methods to invest in property could be a more secure way to complete a purchase. The decision to use personal savings to fund all or partial investments should come after other financial options have been exhausted. Buying a rental home can be a successful investment when risks are minimized as much as possible.