Investing in real estate through online auctions can be hard if you don’t have a sufficient amount of extra cash on hand. But if you’re interested in becoming an investor, there are a few other ways you can finance your property purchases.
There are the traditional routes like getting a bank loan (otherwise known as a mortgage), getting help from friends and family, or getting a specialty loan (also known as a hard money, fix and flip, or bridge loan).
But there are also a few non-traditional routes like an FHA 203k loan or a home equity line of credit (HELOC). Here’s a couple of quick explanations.
FHA 203k loanA traditional mortgage loan provided by a lending institution such as a bank that includes a pre-approved amount for renovations. This is a great type of loan for properties you want to fix and flip, provided you’re willing and able to make the property your primary residence while you renovate
By using an FHA 203k loan, you can finance a property through a mortgage at a low interest rate, write off closing costs and the interest paid each month on the loan, use the renovation budget to enhance the property and then sell it for a higher price.
Home equity line of credit (HELOC)A line of credit on your current primary residence that can be used to invest in other properties. A HELOC loan usually has lower interest rates than other types of short-term or specialty loans, and the interest may be tax deductible.
If you’re planning to purchase a property through one of these financing options, we highly recommend doing your research ahead of time to determine which strategy is the right fit for you.
Whatever you choose, be sure to check the auction site for all the property financing requirements to make sure you have your documentation ready when it’s time to turn your winning bid into a closing!