Insider Tips For Raising Finance For Real Estate Investment
Real estate financing refers to the arrangement of money from any source to secure a real estate transaction. As the above statement implies, the main aspect is the ability to secure an investment for property loan. The global financial crisis has left an average American with little or no cash to invest in real estate, while the most critical aspect of purchasing a property is the arrangement of finance. Now that you don’t have enough cash, you will have to arrange the same from one source or the other. Securing finance involves a lot of thought process and you must keep in mind the following points.
A good credit ranking is the prime requirement for securing finance as no one would want to lend money to someone with a poor credit rating and a tendency to default. So make sure before you apply, that you have a very good credit rating. The lender would certainly then examine your credit worthiness by taking into account your assets, liabilities and income potential. As every financer has a certain criteria, make sure you are aware and qualify before applying.
The next thing the financer to the real estate investor will demand is a cash flow prediction. This shows your ability to generate enough cash flow to repay the financer without putting excessive burden on yourself. You will have to show him how you plan to use the property and how well would it generate any revenue. The financer has to be sure of your payback ability before sanctioning the loan.
Feasibility of the proposed plan
The lender is sure to ask you for a feasibility report if you are applying for commercial real estate financing. He will look into how profitable the business can be run and its revenue generation potential. Of course, location of the property plays a huge role, but ultimately, the lender has to be satisfied of the long-term feasibility of the project.
A professional financer would look for loopholes in your statement and would take an extra-cautious approach as his money would be at stake. Don’t let him decline you finance. Put in some extra hours and prepare the feasibility report very carefully without any loopholes and convince him of your business acumen. The financers in these times of economic recession are not willing to take any risks, and so they would not lend you if your project is risky. They would study the market trend and if your project has an element of risk, they will not finance it.
Assurance of future payments
Again, before lending you the money, the lender would want complete surety that his investment would not go down as an irrecoverable debt and that the real estate investor would be able to pay installments on time plus interest and any taxes the law of the land would call for. The loan officer might ask some weird and uncalled-for questions so it is better to choose the loan officer very carefully. Of course acquaintances help and also look for referrals from friends and relatives.
In the end, if you are willing to go the extra mile and keep the above factors in mind, then you are certainly in a very good position to get someone to finance your real estate project. Best of Luck!