How To Get Finance For Investment Property – Investing in real estate can be a great way to diversify your portfolio and build wealth. But before you jump into the world of real estate investing, it’s important to understand the different financing options available and how they affect your investment strategy. In this blog we will explore mortgage options for property investment in Australia and offer tips on finding the right loan for you.
The first step to financing a real estate investment is to understand the difference between types of mortgages. The two main categories are principal and interest mortgages, or interest-only mortgages. Principal and interest mortgages require higher monthly payments because they include both loan payments and interest costs, while interest-only mortgages typically have lower monthly payments because they do not include loan payments.
How To Get Finance For Investment Property
When choosing between mortgage types, it is important to consider your own personal financial goals and objectives. For example, if your primary goal is to build equity in the property over time, a principal and interest mortgage may be more suitable compared to an interest-only mortgage that doesn’t help build equity until you start paying off the principal balance. to pay Loan. On the other hand, if you’re looking for short-term cash flow relief, an interest-only loan may be more appropriate because of its lower monthly payments.
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Once you’ve decided on a type of mortgage, it’s time to start shopping around for lenders that offer competitive rates and terms that suit your financial needs. Different lenders compete on different criteria such as fees (set up / annual / lender) or features such as offset accounts, so it pays to compare all options before making a decision. In addition, some lenders also provide specialized products that can be tailored specifically to investors, such as allowing multiple loans or using rental income from the investment property for loan serviceability requirements – so don’t forget to ask about these options too!
Real estate investing can be a great way to grow your wealth, but it’s important to understand the financing options available so you can make an informed decision when choosing a lender and mortgage product for your needs. While every investor’s situation is unique, there are many competitive rates and features offered by lenders that can be tailored specifically for investors looking to buy an investment property in Australia. With careful research on what’s out there, taking advantage of these specialized products could help you get one step closer to reaching your financial goals faster! Well, we have an exciting episode today because many of you have retirement accounts. Many of you have self-directed retirement accounts and a percentage of you don’t know what to do with that money. And that’s why we’re going to help you today, because yes, you can invest in real estate. Yes, you can get financing. And unfortunately, many people don’t realize that they can get mortgage financing to invest in real estate in their self-directed retirement accounts. Did you know there is over $19 trillion, that’s trillion with a T held in retirement accounts. This is from 2020, just last year. So there is a lot of cash and assets held in retirement accounts. But the question is, are those of you who are in the stock market and fear that maybe it’s a little frothy and a little overvalued, and maybe you need to take some chips off the table and move them into hard assets like real estate, or you’re sitting on cash because you don’t know what to do with it. Well, that’s what we’re going to talk about today.
So today I have two guests. I have one of our new and very experienced investment advisors, Nate Hall, on, I think, the zoom call and the recording. Today we write in different ways. So Nate is one of our investment advisors here who is very well versed in investing in self-directed IRAs and strategy related to that. In addition to that, we also have Bob Cash and Bob is the president and CEO of Sierra Crest Capital Inc. Now, Sierra Crest Capital is a commercial real estate lender, and they are a vital source of capital for over 1200 real estate investors. They originated over $150 million in non-recourse IRA loans. Now that’s a key term there non-recourse this. We’re going to talk about this today because it has to be a non-recourse loan for you to invest in your self-directed retirement account. And Bob has an extensive background in all aspects of mortgage lending, including appraisals, residential sales, loan, origination, escrow title, and underwriting, private money loans. So with that, Bob, welcome to the show, Nate, welcome to the show.
Well, it’s great to have you guys on Bob. Let’s start with you. Did I miss anything regarding your background in Sierra Crest Capital or anything you want to fill in?
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No, I think you did pretty well. We are a private money lender. And the one thing that I really want to focus on is, I shouldn’t say, is the commercial business lender, and the difference between what we do and what maybe a conventional lender would do is that we don’t lend to individuals . We are not a consumer lender. We are a commercial business lender, which means we only lend to entities. You must have an entity, a trust, and as, but an LLC, or you must take the title of your assets in the name of a custodian. And we’ll get more into that from a standpoint of what works best in that scenario. But if you call and say, Hey, my name is Marco Sands, really? And I want to borrow money from you, Marco, unless you have an LLC to do business.
OK. I don’t want it to scare or discourage anyone listening to this because they think, okay, yes, I have a self-directed account. I have some money. I have real estate, but I don’t have an LLC or an entity. So I don’t qualify. Or that’s not something for me. You are absolutely wrong because it is very quick, easy, simple and cheap to set up an entity like an LLC that you can use for title holding purposes. So if you have that, which is quick, easy and simple to do now, you can have access to this financing, assuming you qualify for the other terms, right?
Yes. Yes. And thanks for pointing that out. So yes, we are ready to go from that point of view. So if you have determined what your entity or how to give the title to the property, we would think that this is the easiest real estate loan you will ever get. So what we’re going to do is we’re going to determine where your assets are, how to get the title. And then we will look at the fortune. We are an asset-based lender. So we focus more on the assets. Non-recourse loan means two things. Number one is that there is no personal guarantee. The IRS requires non-recourse because there is no personal guarantee. The reason there is no personal guarantee on these types of loans is because you do not technically own your retirement dollars. Your tie retirement dollars are held in trust by a third party.
And that’s what keeps the tax-exempt status or the tax-exempt status in a Roth IRA. So you want to be able to make sure the IRS says you can’t have a personal guarantee on something you don’t own. So that’s a real key point from a point of view why the non-recourse, the non-recourse from the lender’s point of view means that because there is no personal guarantee, the only recourse we have against this transaction is in the event of a default to foreclose. on the property and take the property back. So we really want to focus on the asset, not the individual, not the entity that took place. We go through that and find out what happens. But we really want to focus on the assets and the ability to generate enough income to service the debt. So it’s really debt service ratio is what we want to look at.
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We do not do appraisals on any of the loans. So we don’t worry about what the value of the property is. That is really between the buyer and the seller, having a meeting of the minds to determine what is a good price for that particular property based on that proforma. And Nate can relate a little more on that. But what we want to do is we want to check the rent. So the income that this property can and will produce going forward is what we want to focus on going forward. We do this through third party channels. If we get someone who comes through and says: Hey, I have
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