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Equity loan on investment property is one of the possible options for you to get the needed cash for the down-payment of your dream house or another rental property. There are many other types of loans out there, and this seems to be one of the promising options especially if you have an existing investment property that you can use as collateral.

Before jumping on board to this kind of loan, it is best to know what home equity loan on investment property really is, and determine its suitability in your case. This is by no means suitable for all circumstances. There are instances where this type of loan is not recommended. It is, likewise, important to know its pros and cons in order to better understand how this loan can help you.

What is an Equity Loan on Investment Property?

By definition, home equity loan on investment property is a type of loan made to partially or totally finance the required equity for a home loan. This loan is, obviously, secured by an investment property like a condo for rent, or any other property acquired and already owned for the sole purpose of making profit out of it.

Can you easily get approval for an equity loan on investment property? Well, that depends on several factors that include the type of investment property that you have, and your current credit score. If your investment property has a high market value and earning generous income per month, then banks and lenders will quickly give you a thumbs up for this type of loan.

However, it depends on the current financial market condition. In times of financial crisis and a falling real estate market where property values are tremendously going down to unimaginable low levels, this loan can hardly get approved since banks and lending firms will have a hard time disposing the property in the event of loan default. But this is not a problem under a bull market with rising real estate values.

Your credit score is another important factor. A good financial standing tells lenders that you are credit worthy. Banks will give you any secured loan for as long as you have a good reputation for paying your financial obligations on time.

Either way, equity loan on investment property is one of the best options for you to get your desired home loan that requires outright equity payment.

Equity Loan on Investment Property: Pros and Cons

While an equity loan on investment property can give you quick access to cash to finance your purchase of a home or investment property, it is important to keep in mind that getting this kind of loan only adds up to your total financial obligations to various lenders. Failure to keep track of all your debts may cause loan default, thereby putting your investment property at risk of being foreclosed.

Equity loan on investment property generally has significantly lower interest rates compared to the credit card rates and the standard rates of home equity loan on credit (HELOC). But being a second-mortgage loan, the rate is still relatively higher compared to a first-mortgage loan with longer terms. If you are using an equity loan on investment property to purchase another investment property, make sure that the return on investment of the latter is higher than the interest rate of the former.

Equity Loan on Investment Property: Is this Type of Loan for You?

So, what’s the bottom line? You may have come to a point wherein you want to acquire a property for your personal use or as another rental property through a home loan and the required equity is just way beyond your present cash level; an equity loan on investment property can provide a good solution to make both ends meet. However, you should also be mindful of your present financial capacity. Having two different loans at the same time can be quite heavy.

Unless you are good in financial management and you have a strong and stable source of income, an equity loan on investment property might be just what you need to get your dream house or rental property.

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Rationale Behind Investment Property Loans

Personally funding your own real estate investments can bleed you dry. Most newbie real estate investors do not have the money to fully pay off an investment property, that’s why they will need to secure funding from somewhere. Even savvy real estate investors who have the wherewithal to pay investment properties in full would definitely not do so. They use investment property loans as leverage so that they do not touch their own personal funds. In investor parlance, they use OPM or Other People’s Money to make money.

Investment Property Mortgage Loans Versus Residential Mortgage Loans

If you are buying a property that you do not intend to use as a place of residence but for profit, then it is considered as an investment property. If this is your first time to obtain a mortgage loan for your rental or other investment property, do not expect lenders to look for the same things that you were asked for when applying for a mortgage loan for your personal or primary residence. How the property is to be used is crucial for lenders in deciding on collateral, down payment, and income verification requirements, and the terms and rates.

Requirements For Income Verification. If you can remember it right, you were required to verify your source of income when trying to obtain a residential mortgage loan. This is because lenders would want to be certain that the borrower can afford to consistently pay for the monthly mortgage payments. The debt to income ratio is often used to determine this.

The process of income verification to obtain a loan for a real estate investment is another story because it will not concern your income but the income that the real estate can generate. So no payslips and other personal financial documents may be required. However, lenders may also require that you show them rental receipts, net income statement and other financial documents as filed on your income tax schedules, if you already own a property used as a rental home, vacation home or for commercial use. This is to find out the proportion between income and the loan amount.

Collateral and Down Payment. The lender makes use of the down payment to establish the level of risk that he will be coming up against. For a residential loan, lenders commonly require a minimum 20 percent down payment, bringing about an 80 percent loan-to-value or LTV ratio. At this rate, the homeowner is not liable for any additional requirements, like a private mortgage insurance. This insurance is required for mortgages with LTVs that are more than 80 percent.

On the other hand, you do not have to make a down payment when obtaining an real estate investment loan as it is already secured by the property itself. With the rents and other income earned by your investment property, your lender is assured that you can service the loan.

Terms and Rates of the Loan. As an investor-borrower, you have the advantage to bargain a better loan rate and terms than if you are borrowing for a personal home. This is again because of the consistent cash flow that can be expected from the rental property. The lender would also be more willing to give a real estate investor a more favorable rate and terms to cultivate a good business relationship than to an ordinary homeowner if they spot business opportunities related to the said real estate.

Factors That Affect Investment Property Loan Rates

The mortgage rate you get for your real estate investment will depend on several factors. Some are discussed below.

Rental Property Versus Buy-Rehab-Sell. You can get a better rate with a rental property that already has a dependable tenant whose monthly rental is higher than the monthly mortgage payments, as opposed to a house that you intend to fix and resell for a profit. If you are into rehabbing handyman specials, you have to substantiate that you can afford to make the monthly payments even if the home has not been sold yet.

100% Mortgage and Down Payments. Loan terms that do not require a down payment, labeled as 100 percent mortgage, may also exact a higher interest rate than those that do.

Property Location. If your rental property is in a good neighborhood where vacancy rates are low, this reassures your lender that you can fulfill the payment schedule, hence, it is in your cards to get a lower rate.

There are more factors that can affect your loan rate. Rates also vary from one type of lender to another. Shop around to get an idea of the range of rates you can get and so that you can haggle. You can use a mortgage rate calculator in one of the many sites in the Internet to compute for your rate.

Can You Obtain An Investment Property Loan Through FHA?

Some people prefer obtaining mortgage loan from the Federal Housing Authority because of its more lenient credit qualifying criteria and the down payment or equity requirements are less as compared to conventional loans. Moreover, borrowers with a slightly marred credit record or those who do not have credit history yet may qualify for an FHA.

Despite these advantages, however, you as an investor may not be able to secure an FHA loan to finance your real estate investment because only properties that are to be used as primary residence can qualify. But if it is a duplex or a 4-plex and you are planning to make one of the units your primary residence, then you may qualify. If, later on, you move out of the unit, the property may still be considered as an FHA property and may qualify for streamline refinance or loan modification.

Investment property loans are essential to any real estate investor as it can be used as a leverage to make profit using other people’s money, of course, at a cost. Besides other factors, the earning potential of the real estate holds sway in determining the loan rates.

Investment Property Financing – Finance Investment Properties With 100% Financing

Real Estate Investors’ Big Secret – Investment Property Financing

5 Ways To Finance Investment Property

Quick Tips On Financing Investment Properties

No Cash For a Down Payment? Consider 100% Financing on Investment Properties

Despite the tightened criteria to qualify for a loan, it is still possible to obtain 100 % investment property financing if your real estate investment makes sense, and if you have a good credit rating and some creativity.

Investment Property Mortgage – Ways To Get The Best Loan Rates For Your Investment Properties Including The Use Of A Calculator

Savvy Investors Leverage on Investment Property Mortgages

Investment property mortgage is the lifeblood of any real estate business. Most investors cannot, or would not, use personal funds to purchase investment real estate. They make use of other people’s money to make money. Of course, you cannot do this if the interest rate you get is higher than your rate of return. So here are a few tips on how to obtain better rates and terms.

Sort Out Your Income and Debt Before Applying for an Investment Property Mortgage

Your income and debt could either decrease or increase your loan rates, whether applying for a personal or rental property. If debt servicing eats up more than 36 percent of your income, chances are, you will merit a higher financing rate. To obtain a significantly lower loan rate, fix your finances first in such a way that debt servicing will constitute only 28 percent of your income.

Raise That Score To Get Better Investment Property Mortgage Rates and Terms

Another factor of mortgage rate is your credit rating. Evidently, a stellar credit score will more likely merit a lower rate. A score of 620 may add as much as three percent to your rate as compared to having a score of 760 to 850. So before applying for financing, check you score first and take pains to improve it if it is still below par.

Save Up For Down Payment For Your Investment Property Mortgage Loans

The higher down payment you can put up, the lower the rate you can get. That is why, it is crucial to save up some money for this payment. Try to have at least 20 percent for down payment to get better rates. Choose your lender well as some may ask for a heftier down payment for investment properties. In UK, rates for real estate investment also used to be higher than those for residential properties.

If you cannot raise money for down payment, you can opt to get a second loan to take care of this. Some investors advice that you obtain the 2nd loan from the same lender to avoid confusion and complications in the future.

Refinance Mortgages for Investment Properties

If you already own a property that has substantial equity, but you feel burdened by the high mortgage rate or you need to improve your cash flow, consider refinancing your loan. A cash-out refinance is one way to convert equity into cash. You can also refinance to a lower rate or longer term so that you can better afford your monthly mortgage payments and further improve cash flow.

Try An Investment Property Mortgage Calculator

Before jumping onto the first mortgage you get, shop around first to get an idea of the range of rates you can obtain. Many websites provide investment property mortgage calculators to make things easy in determining how much equity you need to have, and also get suggestions on the most appropriate loan for you.

Every shrewd investor knows that a better investment property mortgage rate has a tremendous impact on cash flow and the profitability of the investment; hence, knowing the factors that affect rates and how to work on them to your advantage is crucial.

Refinance Investment Property – 4 Other Reasons For Refinancing Loans For Investment Properties Besides Lower Mortgage Rates And To Cash Investment Out

Refinance Investment Property To Adjust Terms According To Your Current Needs

After some time of paying off the mortgage for an investment property, your personal earnings and investment needs may have altered. Hence, you may find to need to refinance investment property so that you can either change the terms or loan period or even the interest rate. Should you now be able to afford a higher monthly mortgage payment than before, making your loan duration shorter allows you to pay less interest and take ownership of your investment property sooner. Should you find yourself in the opposite side of the financial spectrum where you need more affordable monthly loan payments, the you can also refinance to extend the loan period so that you minimize the risk of missing out on payments.

To Switch To Lower Investment Property Refinance Rates

One of the main reasons investors refinance investment property is to substitute current mortgage with a new loan that provides lower interest rates. A two to three percent reduction in interest rate can contribute to a few dollars of monthly savings, depending on your total mortgage debts. And yes, more savings mean more profit.

Besides looking for lower rates, some investors also refinance their mortgage to switch from their adjustable rate mortgage (ARM) to a loan offering fixed interest rates. This is especially sound to do when current interest rates are really low, hence, you can opt to lock in dirt-cheap interest rates. On the other hand, if you still see interest rates in the long run to plummet, you refinance to switch from a fixed mortgage loan to ARM.

Cash Out Refinance Investment Property To Boost Cash Flow

If you find your real estate business financially tight and needing more liquidity, refinancing is one way to cash your investment. You can do this if you have accumulated sufficient equity in the property. Even without the cash out scheme, you are still, in essence, boosting your cash flow when you refinance a property with a lower interest rate or extended loan duration since you will be paying less in monthly mortgage.

Refinance Investment Properties To Upgrade Properties and Increase Rents

Some investors opt for the cash out refinancing and use the cash to bring the property to code. Doing so increases the market value of the real estate, hence, enabling them to also increase rental fees. Now you have an idea of where to get funding should you decide to renovate doors, floors, kitchen appliances and cabinetry, extend the structure to increase living space, replace the roof, or whatever renovations you are considering.

Obtain Investment Property Mortgage Refinance To Acquire Another Property

Besides renovating your property, you can also use cash out refinance to invest in another property leveraging on the accumulated equity of the existing property.

Use Investment Property Refinance Loans To Use Money For Other Purposes

Actually, you can cash out refinance to fund just about anything, not just for your real estate investments. You can also use it to diversify your investments in other baskets such as the stock market and market for other commodities. You can increase your retirement savings, consolidate debt, start a new business, buy a new car, augment funding for the college tuition of your kids, and just about anything.

With lesser interest rates and monthly mortgage payments, and possibly additional cash, you can refinance investment property to boost cash flow, strengthen your investment power, increase long-term wealth, pay off debts and just about anything.

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Probate Real Estate – A Gold Mine of Great Deals!

One of the open secrets of seasoned real estate investors is to “make money with real estate when you buy, not when you sell.” New entrants in this business are taught to look for highly motivated sellers who are, for some reasons, ready to sell for a very low price. If you are already doing this, by now you may have found out that many other investors are also on the lookout for such great steals. But if you stretch your neck and look beyond, somewhere in the Great Divide, you will find a rich source of great bargains – probate real estate – with very little competition.

What is Probate Real Estate

Probate generally refers to the process of administering and processing a person’s estate – all his belongings (including real estate) – through the legal system after he passes away. The judge in the probate court commissions an executor to be in charge of the administration. The executor is responsible for ensuring that the possessions of the deceased are fairly divided in accordance to what the deceased wished. The executor may be bestowed various levels of power by the judge, depending on the state.

Why is Probate Real Estate a Great Deal?

As mentioned earlier, you can obtain a probate property at deep discount because heirs are motivated to sell.  Inheriting a property is not a bed of roses where the heir simply becomes the owner of the real estate. Inheritance is accompanied by responsibilities, such as paying taxes, repairing the property, or in some instances, taking care of mortgage or second mortgage. However, since the heirs also have their own lives to live, they may not have enough time, energy and inclination to assume this additional role and would rather dispose the property to obtain ready cash.

What more, there is usually more than one heir who lives separately or can’t possibly live together in the property. This makes selling the property the best option so that all of them get to enjoy their fair share of the inheritance. Hence, they are often motivated to sell.

Ways To Locate Probate Real Estate

Regularly visit your local courthouse to research a list of wills submitted for probate. In your research, pay attention to three vital information: the deceased, the beneficiaries and the executor. Then dig up on records of deeds to properties held in their name. If this sounds like a lot of tedious work, you’re right.  This is similar to the kind of legwork an investor would have to do when looking for pre-foreclosure leads at the courthouse. Just like there are pre-foreclosure lists for sale, there are prepackaged probate lists organized by county that provide all the contact information you need to start mailing out your postcards. Google “probate lists” and go with some of the big players instead of spending all your time at the courthouse weeding through files.

Ways To Get In Touch With Beneficiaries

Investors who are into this niche often send postcards or letters and contact the new owners by phone to let them know of their interest in the property. Some even pay them a visit, but I have heard varying rates of success with door knocking. Stick with letters and post cards trying various copy writing to get their attention to take action with you. When you reach out to them through these means, always remember that they may still be mourning so a show of sympathy will be in order. They may not have thought of your offer of ready cash as a solution, but once they get to see the beauty of it, they may be willing to accept an offer for as low as 75 percent of the market value of the property. There are even services out there that will send out the postcards for you, just provide them your addresses and message.

The Legality of Selling Probate Real Estate

The executor has the authority to decide to sell provided that the heirs are in agreement. In certain instances, the permission of the court may be necessary. But do not worry, since it usually only takes the agreement of the heirs for the judge to allow the sale. To be sure, get to know the laws in your particular state for other requirements since some states necessitate the listing of the house through a licensed real estate broker.

Although not everyone knows this, probate real estate can be a gold mine of great bargains because the heirs are often motivated sellers and not many investors are even aware of this niche. A little legwork and research could lead you to great bargains and handsome profits. It’s all about consistency in your efforts.

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Buying Investment Property – What’s At Stake

Buying your first investment property can be daunting since it involves an elaborate buying decision-making process and a substantial amount of money. One wrong move could possibly lead you to losses instead of handsome returns. That is why, before making any move, it is crucial for real estate investment rookies to learn the ropes from industry mentors, real estate agents, accountants, lawyers or through research to keep mistakes at a minimum. You are lucky to be in this page since this post discusses the fundamentals on how to buy investment property.

How To Buy Investment Property 101

Plot Your Game Plan. In this business, there can be an infinite number of strategies to implement depending on how innovative an investor can be. Just remember to always opt for those which are ethical and legal. However for fledglings, let us just initially consider the primary approaches: buy and hold; buy, fix and sell (or profit, of which this website is all about), wholesaling, flipping, and renting out for cash flow. Your choice of strategy will dictate the type of property you need to invest in.

Decide on The Type of Property. The complex buying decision-making process begins. What type of investment property must you buy: handyman specials, apartment buildings, a single family home, vacant lots, condominiums, mobile homes, commercial properties, industrial properties store fronts, and what have you? These babies offer differing levels of risks and payoffs and require different game plans.

If this is your first investment, a single-family home for you to rent out or flip, or perhaps a multi-unit apartment as a source of cash flow may be a suitable choice to kick-start your real estate career. These kinds of properties potentially allow you to make a killing or could become a wellspring of regular cash flow. What makes them more preferable is that they are less regulated than mobile homes and condominiums in many areas, have shorter average vacancies as compared to industrial and commercial properties, you can obtain a good deal of information on how to buy investment property of this type.

Pick An Area. The location of a property is an important factor that can have a lot of sway in the profitability of your investment. It can dictate how much rent you can charge, for how much you can resell the property and the kind of tenants you will be taking in. Thus, it is important to make the right choice.

Your tenants must be employed to be able to pay rent monthly so consider areas with robust economic bustle with numerous employment opportunities. Good schools, shopping, transportation, and low crime rate must also be in your checklist as these attract prospective tenants. It would be great you can pick an area which is accessible from where you live so that you can conveniently and regularly check it.

To help you assess an area vis-a-vis our criteria, read the local papers and city newsletters for the previous years. This way you will get a picture of events in the locality that can influence the value of properties, such as changes in zoning, laws and land use planning. You can also discuss this with other real estate investors.

Once you locate an area satisfying these prerequisites, start your hunt for the particular property.

To recap, the question “how to buy investment property” can be answered with three words: strategy, type, and location of investment.

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Finding The Right Residential Investment Property

When looking for the right residential investment property to acquire, the location is one important factor. You may want to research for an area’s capital growth history especially if your strategy is buy-and-hold. Seek for properties that are in areas that are low in crime rate and robust in economic activity. Good schools and a stable local industry are indicators of a neighborhood with great potential for your real estate investment. Consider locations with low vacancy rates.

Determine the needs of your particular market – parhaps a 3-bedroom, 2-bathroom house – and look for a property that suits these needs.

Although buying a property at a good price is great, beware of residential properties that are offered at rock bottom prices; they may have their reasons for being cheap. Properties that are ready for occupancy are great so that you can start renting it out and receiving a steady monthly rental income. However, if rehabbing is part of your strategy, then looking for handyman specials may allow you a discounted purchase.

Inspecting The Residential Investment Property

Thoroughly inspect the property before you ink the contract. You may have to shell out some amount for building and pest inspections but this expense may save you from a possible more costly expense later if you fail to determine a structural defect or pest infestation in the property you would have purchased. Visit the property you are interested in at different times of the day and week so that you can evaluate the traffic and noise levels. Visiting it on a rainy day would also be a great time to find out if there are are leaks. Keep your eyes peeled for cracked walls, deteriorated floorboards under the carpet, mold growth and related problems, plumbing problems and other signs of additional expenses.

Determining The Right Loan For Your Residential Investment Property

You can choose from three types of loans to fund your investment: fixed interest rate, variable interest rate and line of credit. Some investors opt for interest only repayments so that they can reduce their interest repayments. If your investment property is well-founded and you can demonstrate to your lender the potential of the investment, getting an investment loan will not be a problem.

Working Out The Cash Flow of Your Residential Investment Property

Determine the going rental rate in the area where your candidate property is located by asking other real estate investors, real estate agents or by just by browsing the rental listing of the local newspaper. Also sum up the expenses which you forecast to incur when running the property, such as maintenance, property management expense, mortgage, taxes, insurance and vacancy. Deduct this amount from the rental to get your cash flow. Make sure that this is positive or else you may be putting your money where you may just lose it.

Acquiring a residential investment property requires thorough research, due diligence and some math to ensure that you make a considerable profit out of it.

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Location precedes structure or the building. That should be the emphasis to consider when deciding on where to buy investment property. A respectable real estate investor once said that if you have to choose between a property in a good location but with an inferior building and a property in a lousy location with an impressive building, pick the former. This is because location is constant while structures can be renovated, remodeled or demolished. Of course, you do not have to settle for any of these if you can find an investment property with a fabulous structure located in a fantastic area offered at a reasonable price that fits your budget. So how do you determine a great location?

Pointers On Where To Buy Investment Property

Locations With Sustained Capital Growth. Look for places that are registering capital growth. This could be a promising suburb with an exceptional attraction or located near the city. This may also be a local town with a thriving industry. Most often, these places bustle with a robust economic activity. Properties that are near schools, workplaces, malls, parks, beaches and other important establishments and attractions and are accessible to public transportation would most likely make a good investment. You can target families with kids studying or adults working in these institutions as tenants. An area with a healthy economy also means that the population there can pay for rental. Ten to 20 years down the road, properties in capital growth areas will also allow you to earn not just from monthly rental, but also from capital gains once you eventually decide to sell the property.

Properties In The Buyer’s Market. When deciding on where to buy investment property, another important consideration is the real estate market cycle. Go for areas that are in the Buyer’s Market. This phase is characterized by a decline in home values and properties remain in the market for extended periods. This is the time when you can buy cheap and wait for the next Seller’s Market, during which housing prices go up, before you sell. If you want, you may also buy investment properties during the early phase of the Seller’s Market for flipping since selling goes at a quicker rate at this point.

Properties With Good Rental History. It would be great if the property you are eyeing already has existing tenants so that you can fill in the landlord shoes and start receiving monthly rental income right away. However, for your protection, check on rental history record; how the tenants are, if there were extended periods of vacancy and reasons for such.

Properties Away From The War Zone. Avoid properties in neighborhoods that have the potential for strife, violence and have high crime rates. Although you will not live there, you may have a hard time attracting tenants or you may not be able to find an interested buyer when you decide to sell it. Also think twice about locations that are prone to calamities such as flooding and earthquake.

To help you decide on where to buy investment property, consider locations that are in the Buyer’s Market, peaceful, indicate capital growth and that have great potential for occupancy.

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Buying an investment property is not as simple as going to a shopping mall, window shopping and trying out which ones on display fit you and swiping plastic to pay for the purchase. There are important things to consider such as funding the investment, searching for the right property at the right price and your exit strategy. The following serves as a guide for you when buying an investment property.

Setting The Financial Stage For Buying An Investment Property

Applying For Loan Before Buying An Investment Property. Many people search for a property to invest in first before they work out their finances. However, since applying for a typical loan can take some time, getting a pre-approved loan can also be a great move. In this way, you will not be put in a situation wherein the property you are eying has already been sold while you are still waiting for the approval of your loan.

Obtaining a loan beforehand helps you objectively get a clear picture of your financial state. The process will help you  to take stock of your income versus your expenses and your other financial commitments. The creditor will also look at at your credit history and current savings. By weighing all these things, you will get an idea of how much loan you can afford to repay and for how long. Knowing this will guide you in looking for an investment property according to price range as it gives you a specific budget already. Additionally, agents and sellers will regard you as an earnest buyer by obtaining a pre-approved loan.

Securing a loan in advance also gives you time to study the different types of loans and decide on the right one that suits your needs. The choices include a fixed rate loan, variable rate loan and interest only loan.

Sorting Out Other Costs. When buying an investment property, you must realize that besides the selling price, you also have to pay for other fees, including taxes, legal fees, local government transfer fees and insurance fees that accompany buying an investment property. You also have to prepare to pay for the downpayment which is nowadays often at 20 percent of the selling price.

Searching For The Property

An agent can help you look for the investment property that suits you. You can also register in online sites that help you find the property to invest in. Attend local real estate investment club meetings and network with wholesalers. Leverage  social media and online classified ads in broadcasting your search for a specific kind of property. Your family, friends and social network may also be the link to the property you are looking for. Just make sure to be clear on the kind of property you will invest in.

When deciding on the property to invest in, an important factor to consider is your strategy for the specific property. Are you going to keep it for some time and rent it out?  Are you retailing it? Is it residential or commercial? These considerations may affect the type and location of the property that you choose. Some savvy investors say that it would be better to have a so-so building in a great location, rather than own a great building in an undesirable location.  This usually boils down to how much headache are you willing to put up with for higher cash flows.  Buying a $5,000 fixer upper to hold as a rental does you no good when the tenants stop paying after 4 months.

Buying An Investment Property – The Real Deal

Making An Offer. So comes the big day for you when you make your actual purchase. Buying an investment property typically starts with you making an offer for the property. You need have your earnest deposit money ready, usually $500 – $2000 for smaller deals and up to to 10 percent sometimes for larger deals.  When participating in an auction, such as a sheriff’s sale or bank auction, 20 percent of the purchase price will be required upfront before you can bid. When buying from a private individual try to keep the amount as low as possible, so as not to tie up your money for an extended period of time while sale process works its course.

You may also need to brush up on your negotiation skills. You also must study and understand the terms before inking any contract or agreement.

Sealing The Deal. Once you have agreed with the seller, you may now call your lender for the loan so that you can finalize the purchase. With your pre-approved loan, you can breeze through the process. Once you satisfy all the conditions stated in the contract, the sale pushes through and you now own the property, with the help of your title and escrow specialists.

The process of buying an investment property must be clear in your head before getting involved in one so that you can chew over important factors such as funding and your exit strategy.

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Property Flipping – The Good

These days, the term “property flipping” or “house flipping” carries illegal or fraudulent undertones. It used to just innocently mean buying a property or house below market value or at a discounted price from a motivated seller and selling it quickly with little to no renovations done on the property, thus, quickly generating profit. This real estate game plan includes wholesaling, contract assignment and fix and flip schemes. Property flipping is a good starting point for real estate investors as they can generate quick cash using this strategy with little to no money required.

Property Flipping – The Bad and the Ugly

Then unscrupulous and greedy individuals enter into the already topsy-turvy realm of the real estate market and sullied the innocence of the term through their twisted schemes. They buy a house below market value and overprice them when they sell to make huge profits. Some even go to the extent of quickly “selling” the property to an accomplice at a bloated price, then to another accomplice (sometimes the same person but using a different name), and so on, in a short span of time to further inflate its value. Thus, allowing them to rake in heftier profits. In many cases, these scheming individuals couple property flipping with mortgage fraud. Their usual victims are naive first time homebuyers in low income urban housing markets.

Sprucing Up the Defaced Real Estate Market Due To Property Flipping

The government has taken measures to put a stop to this subterfuge and prosecute perpetrators through the Financial Fraud Enforcement Task Force. To counter this epidemic in Baltimore, a joint task force with HUD was created and a 90-day foreclosure moratorium as imposed. Although numerous offenders have already been put on trial, some are concerned that the risk of facing prosecution may be dwarfed by the whopping pay dirt that property flipping fetches.

Brand Yourself As Real Estate Investor, Not As Property Flipper

If you have just joined the pool of real estate investors, eager to make some fast buck by flipping or wholesaling, do not forget to moderate your greed. Thriving in a world where capitalism is king, there is nothing wrong with being involved in gainful undertakings, such as real estate investing. In real estate investing and in most, if not all, industries, creativity is rewarded. Sometimes, our desire to get what we aim for trick us into thinking that some of our strategies can be called creativity, when in fact, it is already crossing the line. Just get a grip of yourself, steer clear of market manipulation and tread the legal path of buying from motivated sellers, renovating and truly adding value to the property, and respecting the existing market trends in dictating your asking price and profits. Sure, you can buy houses for less than its market value. This is why you look for motivated sellers. Just remember to pass on the good fortune of finding a bargain to your buyers by offering it below market value (if you really got a steal) and still make profit. In this way, you are not just summoning good karma, you can also quickly find a buyer, sell it and move on to your next deal. This is applying the real estate investing mantra of “Make profit when you buy, not when you sell.

When you get into property flipping, stay good and steer clear of the bad and the ugly.