4 Types of Loans for Investment Properties

Are you looking to invest in real estate but need financial assistance to make it happen? There are several loan options available to help you secure the funding you need to purchase land, bridge the gap between buying and selling a property, or finance a second property. One such option is a Debt Service Coverage Ratio (DSCR) loan, which is specifically designed for commercial real estate investors.

Land Loans:

If you are looking to purchase land to build on or hold as an investment, a land loan can help you finance the purchase. Land loans typically have higher interest rates and shorter terms than traditional mortgages, as the collateral (the land itself) is not as valuable as a completed property. These loans are a great option for investors looking to develop or hold land for future use.

Bridge Loans:

Bridge loans are short-term loans that can help you bridge the gap between buying and selling a property. They are typically used by investors who need to quickly close on a new property before selling their current one. Bridge loans have higher interest rates and fees than traditional mortgages, but they can provide the funding you need to secure a new property before selling your existing one.

Second Loans:

If you already own a property and are looking to purchase a second one, a second loan can help you finance the purchase. These loans are similar to traditional mortgages, but lenders may require a higher down payment and charge higher interest rates, as they consider the additional property a higher risk. Second loans are a great option for investors looking to expand their real estate portfolio.

DSCR Loans:

Debt Service Coverage Ratio (DSCR) loans are specifically designed for commercial real estate investors. These loans take into account the property’s income and expenses to determine the borrower’s ability to repay the loan. Lenders typically require a DSCR of at least 1.2 to 1.5, meaning that the property’s income is 1.2 to 1.5 times the loan’s annual debt service. DSCR loans are a great option for investors looking to finance commercial properties.

In conclusion, there are several loan options available to help real estate investors secure the funding they need to purchase land, bridge the gap between buying and selling a property, finance a second property, or invest in commercial real estate. It’s important to carefully consider your financial situation and goals before choosing a loan option that best fits your needs.