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Path to Purchase Step 3

Financing Your Buy-and-Hold Investments

It may be your first time buying a property—or your first investment property. Whether you’re house hacking, setting up a short-term rental, or just doing the regular “buy a house and rent it out” strategy, you’ll want to make sure you have a quality lender who can get the deal off the ground.

In some ways, investment property financing is similar to buying a home with a conventional mortgage—but there are some major differences. If you are house hacking or buying a small multifamily property, you can use a conventional loan. (That’s the standard 15- or 30-year mortgage most home buyers are familiar with.) But most real estate investors take advantage of creative financing to fund their buy-and-hold deals.

Using creative financing to buy real estate

There are a number of creative financing options for buy and hold properties. But most investors will evaluate hard money versus private money for their financing:

  • Private money, or cash from a business partner, friend, or family member looking to invest
  • Hard money lenders, who offer short-term loans with higher interest rates.

Education

Learn the basics

3 Ways to Fund Rental Properties Without Using Your Own Money

What is Seller Financing and How Does it Work?

How to choose the best investment property financing option

Every investor must choose the investment property financing options that fit best for them. But how can you know what’s right? Juggling dozens of considerations can make this decision feel stressful.

To be sure that you pick a financing choice that fits with your strategy, needs, and profit margins, connect with conventional mortgage and hard money lenders to understand your options. What APR should you expect? What loan programs might suit your project? Understanding which financing is available to you could be the difference between you owning a rental… or being stuck in analysis paralysis.

Marketplace

Connect with partners

Do the numbers make sense?

Don’t sign on the dotted line until you’re certain the investment property financing adds up. Can you handle the monthly payments? Do you have a refinancing strategy in place, if you’re planning to use the BRRRR (buy, rehab, rent, refinance, repeat) method?

Perform a thorough review of the numbers with our mortgage calculator—and if you are using the BRRRR method, don’t miss our BRRRR calculator, either! Once you understand your numbers, you’re ready to move forward with a full deal analysis. (Check out our favorite analysis rules of thumb.)

Tools

Apply your learning

Gut-check your answers

Once you’ve got your numbers hammered out, don’t be afraid to ask for a gut check from the real estate pros. Check in with your real estate team: Is your rent estimate accurate? Have you accounted properly for capital expenditures? Is there anything you didn’t consider when assessing different investment property financing options?

And if you don’t have a team yet, that’s no big deal! Chat with experts on the BiggerPockets Forums. Whether you have questions about mortgage points or seller financing, you can always find a pro willing to share their knowledge.

Forums

Consult the community

Image of investment property financing conversation from the BiggerPockets forums. Person one asks,

Know all the details

Financing your first buy-and-hold property is a seriously big deal. Make sure you understand the investment property financing process from start-to-finish before purchasing. Whether you’re looking to invest with a small down payment or build your empire using other people’s money, you can find the perfect read in the BiggerPockets Bookstore.

Books

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