Looking for a Pensacola investment property can be a lot of fun. It is a pleasure to go into a property just dreaming of the profits it could bring. But before you start seriously looking you need to have your financing plan lined up.
If you are planning on financing a rental for the long term it is best to start by contacting a mortgage broker who works with many different lenders.
Find a mortgage broker who specializes in getting loans for investors who will finance your Pensacola investment property.
If you are working with a real estate agent, ask them for a referral. You can also look for investment clubs in your area that are filled with professionals who can help you find the financing you require. Call Dr. Cynthia Tant 850-393-5134 for additional information.
Search for a real estate club in your area by going to www.creonline.com. On the left, look under resources and find the link for real estate clubs.
If you have excellent credit you will have fewer hurdles to jump over. When mortgage companies look at your credit they focus on your FICO score. This is a compilation of the three major credit bureaus and is the standard for determining credit worthiness in the industry.
When looking at your credit score you will have access to the best loans and more negotiating room with a FICO score above 680.
There are now many different loan solutions available to the investor. You can even find loans that will cover 100% of the purchase price.
If your credit is not excellent there are still options available. You may be able to negotiate with the seller to carry a second mortgage.
Let’s say you negotiate a price both you and the seller are happy with. You agree to get a loan for 80% of the purchase price and the seller agrees to take payments for the remaining 20% of your Pensacola investment property.
It is easier to get a loan for 80% of the purchase price. This is especially true if you have negotiated a price below market value. Maybe you negotiated a sale price of $100,000 while the real market value is actually $120,000.
In this example the lender only has $80,000 at risk on a $120,000 property. So the risk is much less.
Interview multiple brokers. It is like picking any other professional. Shop around to find the best solution for your financing needs.
Getting loans for fixer properties is much more difficult.
With fixers, start by contacting a mortgage broker who does traditional financing. Your best bet is looking for a hard money lender or a mortgage broker who works with hard money lenders.
Check your local newspaper under financing or mortgages and you will usually find a few ads for hard money lenders or investment property financers.
While traditional loans will only look at the current value of the property, hard money lenders will look at the after-repaired-value and loan out anywhere from 50-80% of this value before the property is repaired.
It may be a mortgage broker who has contacts with these investors, or another investor who has money to invest and simply wants a good return on his investment.
Hard money loans are expensive compared to traditional financing. Generally, interest rates are between 12-16% and you may need to pay 3 to 5 points up front for your Pensacola investment property.
The benefit is that, in many cases, you can get repair money above and beyond the actual purchase price of the property which is generally unheard of in traditional financing.
Look at the cost of hard money loans as a cost of doing business and make sure you include them in your purchase and holding costs so you end up with the profits you are seeking.
Getting your first loan as an investor can be the most work, but once you establish yourself things become easier.
Finding your Pensacola investment property is what we do at Gulf Coast Home Experts. Contact us today!