What are the best loans that real estate investors should be taking advantage of this year?
2022 is shaping up to be another exciting year in real estate. How profitable it proves to be for most will depend a lot on the financing. So, what loans should investors be focused on utilizing for their deals, or making this year?
1. Fix & Flip Loans
With a unique combination of both motivated sellers and incredible price growth, house flipping is going to continue to be a big business this year.
Utilizing short-term loans to fund these deals enables flippers to limit risk, maximize their potential, scale, and optimize ROI.
On the lender side, these loans can repay quickly, with great collateral in the rare case of a default.
2. Rental Property Loans
Rental rates have been rocketing even faster than inflation. With all that is happening in the economy, rental properties in the right location are only likely to see growing demand and profitability this year.
Low-interest rates and new technology for efficient management are only baking in more profit and that essential cash flow for investors. Though those desiring truly passive income may choose to invest through a real estate investment fund, then becoming frontline operators and property managers themselves.
3. Cash-Out Refinances
Although the current white house administration wants to put more scrutiny on cash real estate purchases across the country, and at all price levels, cash-out refinances make a lot of sense this year.
It will help buy and hold investors to recapitalize and protect the gains that they’ve made. It will help them keep their ROI maximized. As well as to get out and make strong offers on new deals, with the liquidity and reserves to scale soundly.
4. Bridge Loans
Another alternative to cash-out refinances and other types of financing are bridge loans. These are shorter-term loans that fill gaps for investors. Such as for down payments on new and larger acquisitions, or to take on new deals, renovate and reposition them before proving the performance, and qualifying for better rates and terms on long-term loans.
5. Business Purpose Loans
All of the types of investment property loans on this list may be made as ‘business purpose loans’. This differentiates them from retail home buyers and homeowner loans on owner-occupied properties.
Business purpose loans mean less regulation and are less risky for lenders. These can include fix and flip loans, rental property loans, and even lines of credit.
6. Hard Money Loans
Hard money, private money, and asset-based loans offer front-line investors access to capital and financial leverage without all of the hoops required of traditional bank lenders.
They are designed to be faster to close on, with slightly easier underwriting requirements. By picking the right borrowers, lenders can be confident in making a high return, low-risk loan that provides great interest, cash flow, and help fuel investors.
This could be your best year investing in real estate so far. If you are buying, selling, and leasing properties, these are some of the best investment property loans to utilize in 2022.
If you are just focused on high returns, with low risk, and desiring passive income, then you may even want to shift to investing in making these loans through a real estate investment fund this year.