Foreclosure Funding and Finance- By: Jacquelyn Marks
If you are wondering, where you are going to get funding for your future foreclosure investments, then now is the time to shed yourself of pre-conceived notions and learn from the best. Buying foreclosed homes, short sale properties or bank-owned estates may not be your idea of a get-rich quick scheme (and it is not). Nevertheless, careful management of the funds you have on hand and courting good investors can give you the capital to beef up your investment portfolio. Here is a quick rundown of the different ways one can acquire funding, and get started on foreclosure investment today.
Cash on Hand
The first thing you can look at is the cash you have on hand and how much access you have to easy sources of cash such as a savings account, retirement/IRA plan or goods/merchandise that you can liquidate.
This may come from assets you decide to sell, investments you already have or returns from previous loans or insurance policies. Many foreclosure investors also rely on a network of family and friends, especially when it comes to securing the first deal.
Keep in mind that many short sales, tax sales and even some foreclosure deals ask for the full amount when it comes to paying for the property. Think twice before using any of your current mortgages or personal property as collateral.
Like many traditional loans or investments, getting funding the traditional way can be possible, especially if you have average to good credit standing, a low debt to income ratio and a good head for handling investments, payments or debts. The upside of going through the traditional bank route is you get steady interest rates and know what to expect.
Mortgages and traditional financing are a wonderful option if you are looking at foreclosed properties or secondary homes as a buy for your own family.
Make sure you pre-qualify for a mortgage or loan before you make a bid so you have the money to back it up in the event you win the auction.
Another way of securing funding is through private investment. This is a good option if, for example, you have less than stellar credit or prefer not to have this loan affect your credit. Keep in mind that the lenders dictate interest rates for private lending and you may end up paying higher interest than you really want. Otherwise, it is a low-risk investment, which can pay back without early pay or penalties.
Plan for Contingencies
Wherever you get your funding, it is always good to have a little extra set aside for sudden repairs, renovations, fees or other surprise costs that closing on a property can give you. This extra cash can also help you avoid unpleasant surprises when the deed is turned over, if you use it for inspections or appraisals.
Regardless of how you get your funding, your end goals when it comes to investing will determine how much you are willing to spend. The amount you do invest will also determine your profit—and the potential for profit is huge.
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