There are people whose journey in the real estate market ended with one house, while others continue to purchase second homes, vacation houses, and other properties. If you're part of the latter population, you're either looking for a real estate investment or another place to call home.
Well, you should know that the process doesn't get easier. Moreover, the challenges you have to face may vary depending on the type of property you want to purchase.
It's quite fortunate that this guide can walk you through everything you need to know about funding your second property.
The Case of the Real Estate Investment
Real estate investments come in many forms, including house flipping and commercial real estate properties. How you fund these real estate investments depends on the property you want.
You may have to buy a fixer-upper if you're thinking of going for the house flipping route. Fixer-uppers are vernacular for homes that require significant repairs and renovations. These properties often come with a lower price tag compared to other houses.
With that said, you may need to look at your current finances in this situation. Fixer-uppers go quickly, so most flippers opt to pay in cash.
If you can't pay in cash, you can also apply to alternative mortgage lending sources. These lenders specialise in giving home loans to people who want to purchase and renovate fixer-uppers.
Commercial Real Estate
On the other hand, commercial real estate may lead to trickier ventures because they require higher capital.
You can look into bank loans or the best mortgage brokers to secure a loan to let you purchase commercial real estate properties.
However, you may have to present more than what you would if you're buying a house. This is because banks and mortgage lenders will want to know the following:
- The amount of money you currently own
- The amount of money you can invest in commercial and residential properties
- The amount of money you can put in each month
The Case of the Second Home
Not all people looking to buy a property do it for profit. Others simply want a second home. If you're the same, you have various funding options available, but one depends on what you want to do with your current home.
Sell Your Primary Home
If you're thinking of moving on to a new chapter in your life in an equally new home, you can sell your old property to fund the new one.
You should note, though, that this process may take longer and require more money if your old property needs some renovations.
Of course, you can sell it as is, but you may not get the profit you need to pay off your new property, which will end with you taking out another loan.
Home Equity Loan
A home equity loan can offer you the cash you require for your second property. Here is where the equity of your home comes in handy. Equity is the difference between the market value of your property and the amount you owe.
Say the market value of your home is 400 thousand dollars, but your mortgage balance is 150 thousand dollars. In that case, your home equity is 250 thousand dollars.
You can use the 250 thousand dollars for other purposes, including purchasing your new property.
As you can see, there are many funding options when buying a second home. However, this doesn't mean purchasing a second home is easy. People may stumble upon challenges and barriers, but they can get past them in time. If you're engaged in this process, you can use this guide to help you through.
You may need to work closely with a mortgage broker who can assist with investment lending. Wealthy You is one example. We are some of the best mortgage brokers in Sydney, dedicated to helping you realise your real estate dreams. Contact us today to get started!