Shy away from big banks
If your down payment isn't quite as big as it should be or if you have other extenuating circumstances, consider going to a neighborhood bank for financing rather than large, nationwide financial institutions."They're going to have a little more flexibility," Huettner says. They also may know the local market better and have more interest in investing locally. Mortgage brokers are another good option because they have access to a wide range of loan products, but do some research before settling on one.
"You need a veteran mortgage broker that knows how to find investor money," Spofford says.
Recommendations from friends also are a good way to vet lenders, and investors shouldn't be afraid to inquire about their credentials, and then verify them. "What is their background?" Huettner says. "Do they have a college degree? Do they belong to any professional organizations? You have to do a little bit of due diligence."
Ask for owner financing
A request for owner financing used to make sellers suspicious of potential buyers, because almost anyone could qualify for a bank loan, Huettner says. But these days, it's become more acceptable due to the credit crunch and the number of motivated sellers who want to get rid of their properties.However, you should have a game plan if you decide to go this route. "You have to say, 'I would like to do owner financing with this amount of money and these terms,'" Huettner says. "You have to sell the seller on owner financing, and on you. You need to present a picture to someone so they're not filling in the gaps with their worst fears."
Think outside the box
If you're looking at a good property with a high chance of profit, consider securing a down payment or renovation money through home equity lines of credit, from credit cards or even from some life insurance policies, Spofford says. As always, research your investment thoroughly before turning to these riskier sources of cash.Financing for the actual purchase of the property might be possible through private loans from peer-to-peer lending sites like Prosper.com and LendingClub.com, which connects investors with individual lenders.
Just be aware that you may be met with some skepticism, especially if you don't have a long history of successful real estate investments. Some peer-to-peer groups also require your credit history to meet certain criteria.
"When you're borrowing from a person as opposed to an entity, that person is generally going to be more conservative and more protective of giving their money to a stranger," Spofford says.
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