"Buying a house in Richmond VA as an Investor"

The world of investment properties can be lucrative and exciting. However, if you are just getting started or don't have great credit, finding financing for your rental or flip can be challenging. You have three main options when it comes to financing an investment property purchase. You can get a traditional bank loan, use a private lender, or choose owner financing.

If you have excellent credit and a proven track record, a bank might be your best option. However, if this is not your circumstance, you might have difficulty finding a bank loan, especially for a wholesale property. A wholesale property poses several challenges when it comes to bank financing. ​

How Needed Repairs Can Affect Property Value

Banks use proprietary formulas to determine property value. In a wholesale home, particularly one that might need a bit of TLC, the bank might not see the value needed to back the loan. The bank will not finance a property that it could not immediately sell and get its money back if you were to be unable to pay the loan. Typically, wholesale properties that are perfect for a fix and flip do not meet the criteria for a bank loan.

How Bank Loan Limits Can Affect You

Some banks have limits on the amount of loans that they will finance. For instance, many banks will not finance properties for less than $50,000. They will not even consider that diamond in the rough property that you found for $15,000, even though  you know it will be worth $60,000 or more, after you get it ready to put on the market.
 
Banks are simply not geared towards the small investor. They are traditionally marketed to either the private buyer who plans to live in their purchased home for the next 30 years or the commercial real estate investor with longstanding assets. They have no place for the small, private individual who wants to jump in as an entrepreneur and flip a few properties or purchase a rental. This is where private investors and owner financing can fill the gap. 

The Roles of Credit and Personal Financial Worthiness

​Another challenge that you might face is if you have "less than perfect" credit. Banks typically will not even look at someone with less than a 630 or 640 credit score. They also want you to have a substantial down payment in your account to put toward the purchase. In addition, they want to see a long credit history with very few blemishes. Only a few establishments will consider lending if you have had a bankruptcy, foreclosure, or lien.
 
Let's face it, sometimes life happens. If life has left you in a position where a traditional bank may not even consider you, then a private lender or owner financing might be able to help. Private lenders and owner financing investors look at you as a person. They see the potential and will take more into consideration where you are now, rather than to focus on a few unavoidable circumstances in the past. They often have more lenient criteria, as well. You still have to prove that you are financially responsible and that you are a good risk, but private lenders and owner financing can help in many circumstances where banks will not even consider the deal.
 
As a property investor, you know that every great business idea is backed by a solid plan for success. However, banks are not normally in the business of financing plans, goals, or dreams. It is not unheard of for these lenders to turn down loans for investment properties, even for those who have stellar credit. To a bank, an investment with "potential" simply does not fit the business model. However, that does not always mean that it is a bad idea. Fortunately, there are always other ways to make your investment dreams come true. 

Financing Through Private Lenders

Private lenders and angel investors are one option that many people choose to finance their new investment ventures. Examples of private lenders include Small Business Administration (SBA) loans, lines of credit, peer-to-peer (P2P) loans, merchant/investor loans, and term loans. Instead of using current assets, such as property, to back the loan, many of these options will back the loan based on a share of the profits or the value of the property in the future.

These are viable options for many. However, there are some drawbacks to this option that might make them less enticing. These types of lenders base their lending decision on the future equity of the business venture, rather than on hard assets that banks use. Because they have a stake in the success of the business, they also have a say as to how to operate and manage the property. Many private investors do not want a third-party entity telling them how to run their business. In addition, for those who have a few dings on their credit history, these options might not be available. ​

What Banks and Private Lenders Don't Want You to Know

Private lenders might be a good option for some types of businesses, and there can be many advantages over bank lending. Banks offer generic terms to everyone. The loans and terms that they offer are often dictated by those on the upper levels of the corporation.
 
Local managers cannot change terms or take special circumstances into consideration. You either "pass" or "fail" the requirements for the loan. You also have to either accept the loan terms or decline the entire loan. In addition, banks can take a month or more for you to receive your funds. With private lenders, you can often receive your funds in days.
 
Private lenders often do not have piles of cash sitting around to loan to you. They must often get money from their own lenders and investors. You are riding on their good reputation and credit. However, they also often charge higher interest rates because they must also pay a certain interest rate to their banks. What you pay will be based on their interest rate plus any profits that they wish to receive from you.

We Offer Owner Financing for Investors

What if there was BETTER way to purchase your investment property?

The good news is that there is another way.

This is exactly what Homebuyers of America offers!
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