Now that you know a little about the real estate landscape in the Philadelphia area, it’s time to think about how to get started. Although this guide is a great starting point, there are other resources, such as DIG University, that can also be useful.
We’ve highlighted some of the key areas that you’ll need to consider when getting started. It gives you a framework for how to approach your first real estate investment.
Choosing a Strategy
We’ve already mentioned some of the main strategies you can choose from. This decision ultimately depends on your situation and goals. For example, a property appreciation strategy can be risky in some environments but can give a return over the course of a few years. Similarly, a cash flow strategy gives you the chance to have an ongoing income as well as paying equity into a property.
Consider what it is that you hope to get from your first investment, and then choose a strategy that closely matches those ambitions.
Raising Money/Securing Financing
Your financial situation and access to money will play a huge role in your investment. In Philadelphia, there are a few options available to you:
- FHA Loans – This type of loan is insured by the Federal government. As such, they’re often easier to access for most people. You will need to pay a small down payment, and will likely have a fixed interest rate over the length of the loan.
- Hard Money Loans – When you opt for this type of borrowing, you will have to put up an asset as collateral. Costs generally tend to be a lot higher than other options, but for a short-term project, they can be beneficial.
- VA Loans – These are Veterans Administration loans, and as such are only applicable to veterans. However, they do have a 0% down payment. The interest rate is usually fixed.
- Private Loans – Private lenders come in all different kinds. They can often provide greater flexibility and can be taken over a long term.
- Seller Financing – When the seller has equity in the property, you can pay for the real estate over time. These are hard to come by but can be beneficial.
- Conforming Loans – These are loans that follow specific guidelines from industry specialists. This usually means they require a down payment of around 5%-20% and a fixed interest rate.
- Portfolio Loan – For short-term loans with competitive rates, banks usually keep their own loans. These types aren’t sold off on the mortgage market.
The type of financing you choose will depend greatly on the type of property you’re investing in, as well as your current personal financial situation. As with other elements, you need to assess the situation and make an informed decision.
No Money Down
In some instances, it may be possible to purchase a property without putting money down. However, this can be difficult. You will usually need to find a party that’s willing to undertake such an agreement. Maybe you will find a partner with the necessary fund, providing you have the expertise to manage the investment. Alternatively, you could come to an arrangement with the seller where you swap properties or assume an existing mortgage.
Although investing in real estate without making a down payment is possible, the risks associated with such a tactic can often be high.
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