The world of real estate investments can be a very lucrative field. However, it is very difficult to find a real estate investor – even if they are new to the business – who is trying to finance only one project at a time. Juggling multiple investments can be very risky business, so we can compiled a list of financing options to help keep the cash flow healthy for your real estate investment business.
Making a real estate investment on a property that is listed at or below market value is always ideal, but that property can be used to quickly fund the next purchase, as well. By making a few cosmetic changes and renovations, and then getting the property evaluated at a much higher price than the initial purchase, there should be a marked improvement in the equity of that real estate investment. The difference in equity can then be used to leverage a new property in a very short period of time.
Rent as soon as possible
A commercial or multi-family residential real estate investment has huge potential, but it can quickly interrupt your cash flow if it is sitting and waiting to be renovated. By getting those properties up to code and leasing them out to tenants, the initial cost of the investment can be covered by the rent alone. Many real estate investors turn around investment properties as quickly as possible, to have the rent from tenants cover the cost, add to the current cash flow, and contribute to the next real estate investment. The key is to streamline the renovation process in order to get those vacancies on the market as quickly as possible.
A good part of making a profitable real estate investment is not just seeing where a particular market is now, but if it is poised for growth in the next three to five years. Purchasing a number of properties in one location is good, but if that one area is not experiencing growth, then neither will any of your properties. By investing in different types of properties in different locations, the chances increase of your real estate investment portfolio becoming very profitable. Many real estate investment professionals suggest treating your properties like stock market investments. You wouldn’t put all of your money into one new company and hope it yields a profit – and you shouldn’t do the same thing by purchasing a lot of property in a single neighborhood.
Taking out loans that are structured around payments of interest and principal each month can interrupt your monthly cash flow, because the payment can be fairly high – causing real estate investors to devote a majority of the revenue generated by rent into making those payments. By using interest-only loans, the payments will be much lower, and revenue can be used to make the loan payments, with a lot left over to use for real estate investment purposes. Once enough properties are acquired, the revenue from rent on those properties can be diverted to pay off both the interest and principal, while leaving a healthy income that can go straight into your bank account.