A great source for consistent revenue generation is property acquisitions. However, not everyone has the funds available to purchase properties without assistance.
Many investors will have to borrow money to complete their purchases at the beginning of building a portfolio. Beware and do not rush into a borrowing agreement. It can be a disaster for your portfolio.
Here are seven mistakes to be aware of before borrowing money for a purchase.
1. Concentrating solely on the interest rate.
Many borrowers are so focused on the interest rates that they scare a first-time investor,
but they shouldn’t be the sole focus. The properties are rented out, and the revenue stream from the rental can be used to pay loans down quickly, limiting how much you will pay in interest.
2.Not having sufficient liquidity
Don’t take a loan out based solely on assets that are already in use. In the beginning, you will need liquid assets to assist you with early loan payments. Often, properties you purchase won’t immediately generate revenue, so having assets that can be used immediately can be important.
3. Inability to prepare or finish personal financial statements
Any lender will ask for your financial statements before considering a loan. Make sure all your financial statements are prepared and ready to be presented.
4. Not having experience with a similar property type,
Not all properties are the same. Research which property type you want to acquire before making your purchase. Office and retail properties are managed differently than residential or multifamily properties.
5.Choosing the wrong lender
Another area to research is what lender to use. Make sure to choose one with a good reputation and compare their terms with those of other lenders to find the best opportunity. The Smith King Team has excellent referrals for lenders on investment properties.
6. Allowing insufficient time for closure
Closing can take weeks for lenders to go through all the paperwork and inspections of the property. Make sure to allow for adequate time for a closing so that the purchase window doesn’t pass you by.
Keep in mind that whether you are interested in buying a home or selling a home, a Realtor should represent you—this person is working for your benefit and will help you navigate through the buying or selling process. We have celebrated selling both new and resale homes for over thirty years.
We are here to answer any questions you might have-just email Jennifer@smithteamlasvegas.com
Thank you, and have a wonderful day. The Smith-King Team