I want to start out by saying, we personally do not finance our investments. We believe if you can’t do it with cash, you need to save more. The way we are able to do this is we worked very hard to become debt-free. Because of this, all of our income is now working for us – rather than us working to pay off debt. Keep in mind investing in rental property, flipping, etc. is not really a get-rich quick thing. This type of investing is just like your retirement investing. Slow and steady wins the race. (No matter what you may read).
Before you find the perfect property, you do need to know how you are going to pay for this property. Because there will be an asset attached to this property, you can get financing. However, you need to be prepared to pay a higher interest rate. Other forms of funding can be found at local Community Banks, Credit Unions and personal lines of credit.
Please keep in mind, with any type of loan you need to make sure your debt-to-income ratio is not too high. Keep in mind, it is very unlikely whatever property you purchase will be ready to re-sell or rent immediately. There will be repairs (there are always repairs). When we were purchasing our property, I estimated it would be eight weeks before we would have it ready to rent. This means that particular piece of property it is an “alligator” for at least eight weeks. By the way, an “alligator” is a piece of property that just sits there and eats money.
Knowing how much to borrow is also important. You do not want to get half way through your project and run out of money. Real estate investing is hot right now, and I can’t tell you how many houses we see around our community where someone starts and then simply does not have the means to finish. There is nothing wrong with starting with a small project first and building up to the big money projects.
Below is back side of new property.