Investment real estate lending offers entrepreneurs a powerful financial strategy to diversify portfolios, generate passive income, and increase capital through investment properties. Utilizing real estate loans and other lending forms helps capitalize on property opportunities within desired markets.

Midwest Business Funding empowers entrepreneurs via valuable insights and innovative financing options. This guide answers common real estate investment lending FAQs, enabling more informed financial decisions.

Have questions about investment real estate lending? Get in touch with one of our specialists today at 317-606-3595 or fill out our web form.

What Is Investment Real Estate Lending?

As the name suggests, investment real estate lending encompasses various financial options designed to help with investment property acquisition. This can include special loan types, trusts, cash lending, and other financing types. 

What Is the Difference Between Investment Real Estate Lending and Traditional Real Estate Loans?

Unlike traditional loans or mortgages, investment real estate lending is specifically designed for purchasing properties intended to help you generate income. While this type of funding can assist in real estate investment strategies, it does typically come with different requirements due to perceived risk associated with investment properties. This means interest rates may be higher as well as down payments. 

How Can Investment Real Estate Lending Help Entrepreneurs?

Despite higher rates and down payments, investment real estate lending is often beneficial for entrepreneurs revealing their growth potential. Real estate investing can significantly increase wealth and capital and help diversify investment portfolios, which reduces risk. 

When you use lending when investing in properties, it can also help you get certain tax benefits. The more investments you have, more physical assets are available, which many view as more valuable and beneficial than having certain digits in your stock portfolio. 

What Are the Investment Real Estate Lending Requirements?

As investment properties are considered riskier, lenders will often have more stringent requirements when applying for funding. 

With any type of financial funding, you will need to show that you have enough income to cover the monthly payments and a low debt-to-income (DTI) ratio. To increase your funding prospects, aim for a DTI ratio below 43%. 

You should also have a 700+ credit score to boost your approval chances. That said, the minimum credit score required can vary from one lender to the next. Some may only require a 620 score. 

If your credit score doesn’t meet requirements, making a larger down payment can help. Many real estate investment loans will require a larger down payment, but even if they don’t, a larger down payment can result in more favorable terms and lower interest rates. 

What Types of Funding Are Available for Investment Real Estate?

When it comes to real estate investment funding, many options are available. Understanding these options is important to ensure you make the best decision suiting your investment strategy.

Traditional Loans

Traditional or conventional loans are the most common way to finance investment properties. With this type of loan, a higher down payment will typically be required unless you have a high credit score and significant income. If you can make a higher down payment and have a good credit score you will likely obtain low monthly payments and lower interest rates. 

Hard Money Loans

Hard money loans or bridge loans are a good option if you have less-than-perfect credit or a poor financial history. These loans come from private lenders and are offered on a short-term basis, meaning you typically need to be able to pay the loan back quickly. For this reason, these loans are typically best when you plan to renovate a property and then sell it for more money as opposed to using it as a rental property. 

Private Money Loans

Private money loans come from an individual investor or organization (such as a personal or professional connection) that is willing to loan you the money needed. In these situations, you may be able to get more flexible terms for approval but with higher interest rates.

Real Estate Investment Trusts (REITs)

If you want to diversify your portfolio and earn income on an investment property without directly owning it, you can look into real estate investment trusts. REITs are organizations that own, manage, and finance income-producing real estate while allowing other individual investors to buy shares. 

Alternative Options

There are many other ways you can fund investment properties, depending on your individual situation. Some of these alternative options include portfolio loans, cash financing, home equity loans, FHA loans, and VA loans. 

What Are the Benefits of Real Estate Investment for Entrepreneurs? 

There are numerous advantages to investment real estate funding, including:

• Greater access to capital for property acquisition.
• Significant potential for wealth appreciation as real estate appreciates over time.
• Helps hedge against inflation pressures.
• Gain tax advantages, such as deductions on mortgage interest, property taxes, and other expenses.

Real Estate Lending for Business Growth

Maximizing your success as an entrepreneur means being able to invest in the right opportunities at the right time. Investment real estate lending can help you propel your business forward by enabling you to take advantage of those opportunities.   

At Midwest Business Funding, we make real estate investment funding simple. Our no-strings-attached, client-focused approach makes applying for funding a no-brainer. We are committed to helping entrepreneurs like yourself secure the financing they need to achieve their investment goals and reveal their growth potential.  

Contact us today at 317-606-3595 or fill out our web form to learn more about how we can support your growth and financial success.