Increasing population, high property values, and rapid industrial growth are some of the many reasons why investing in a property in Visalia right now is a good idea. However, deciding to buy a property is the easy part; financing the investment is a challenge. You do not want to spend your entire lifesavings on an investment property, but neither do you want to end up taking a loan that you will have to keep repaying for the next 30 years.
Having worked in the Visalia real estate market for the past two decades, we have a fair idea of the different ways finance an investment property in Visalia. Here are some of the best ones.
1. 1031 Exchange
If you own a property already that you want to sell off, a 1031 exchange can be the best option for you. Under the Internal Revenue Service’s tax code, section 1031 allows you to defer the taxes on your capital gains on the purchase of a property provided you are using those funds to buy a new, like-kind property. However, there are certain rules for this kind of refinancing, so talk to a property manager to see if this is a potential option for you.
2. Finance Your Visalia Investment With A Mortgage
Conventional home loans are available for investors for all kinds of properties. Many private entities like banks, credit unions, saving institutions, and lenders offer mortgage loans. In addition, there are several government loans that you can inquire about, for both first-time and seasoned investors.
You can easily apply for a conventional bank loan if you don’t have pending debts, can pay monthly installments, have a good credit score, and steady cash flow. Note that banks may require a down payment of at least 20%. However, a large down payment results in lower monthly installments.
3. Hard money loans
There are private investors, companies, and small organizations that offer hard money loans based on the market value of the investment property. The interest rate or origination fees for this loan is much higher (about 10%-20%), as compared to conventional bank loans. One advantage of this type of a loan is that you can get it very quickly.
If you find a property that is on the Visalia hotlist and has the potential to get you a high ROI, you can and get a hard money loan to secure the property, if you don’t have enough in hand. Later, you can get a traditional mortgage and repay your hard money loan.
4. Cash Financing For Your Visalia Investment
This financing method is a good alternative for established real estate investors who have substantial capital for a new investment. It is a quick and easy method and expedites the buying process with immediate financing. Plus, you can skip the loan process and save on interest.
5. Leverage 401k For Your Visalia Property
If you can’t get the mortgage or afford the interest rate on a hard money loan, then using your 401k to buy a property is another option. However, from our experience, we say that this is a last-resort option, which you should choose only if there is no other alternative. The purpose of your 401k account is to encourage long-term savings for your retirement and avoid early withdrawals.
In addition, there are other options to finance your investment property, such as real estate partnership, seller financing, and FHA loans. You can talk to a property management company to figure out which is the best option for you.
The Equity Group is a full-service property management company in Visalia that can help you with a clear financing plan, good market research, and a home-buying process. We serve the Tulare, Hanford, Lemoore, Dinuba, Reedley, and Porterville neighborhoods and have helped hundreds of investors find and finance the right property as per their financial goals.
For more information, connect with us at The Equity Group.
