You have decided to invest in the real estate industry. You have watched other real estate investors turn profit after profit in the industry and you are finally ready to capitalize on the business. Where do you begin? The first step to any successful business deal is to create a business plan in an attempt to obtain financing. You will need a detailed business plan to apply for loans from investment mortgage lenders. These loans will be crucial in purchasing and renovating your investment property. Your business plan should provide the following important points.
Your experience Any investor or lender wants to know why you are qualified to do a real estate investment project. If you simply saw others who have been successful at it, but do not have any knowledge or experience, you might want to consider getting some. You will have an easier time obtaining loans from real estate investment lenders if you can prove your knowledge. If you require additional experience, consider working on a project with another investor first who has already been approved for lending. Also, working closely in the real estate industry can be helpful.
Specifics of your business The renovation lending company also wants to know the background of your business and those working with you. They will all be a part of your success and ability to pay off the loan. A typical bank loan borrower looking to take out a business loan has to be 2 years in business, have at least $250,000 of annual revenue, have good personal and business credit, and be cash flow positive. Work with a financial advisor if you are struggling with any of these points.
Specifics about your project The specifics of the project will be the body of your proposal. You will want to lay out your business plan, in detail. Are you planning on purchasing a property, fixing it up, and then leasing it out to commercial businesses? Will you rent a renovated house out to residential tenants? Will you simply attempt to immediately flip the house, without ever having any tenants? All of these points are important in obtaining financing from your real estate investment lenders. They may suggest some changes if there are any points that they do not agree on.
How much do you expect to profit? Investment property mortgage lenders want to know how much money you expect to make on your investment project. If the profit margins are too low, you are less likely to pay back the loan in a timely manner. Investing basics include informing your real estate investment lenders of a safe period of estimated time. Always give yourself extra time, just in case. Never prolong the project too long, as you will find it more difficult to obtain a loan.
Estimated length of project Although it can be difficult to accurately estimate how long the entire project will take, your financing institution will want an estimate. This gives them an idea on how long it will be until you can pay them back. The length of time also notifies them of how much interest they will receive on the commercial property investing loan. Duration or payment period for a private loan is also shorter compared to the traditional loan which can usually go from 1 year up to 20 years, while private loans can only be granted with duration of up to 5 years.
Many investors flock to the real estate industry for good investment deals. In 2014, there were 327,069 home repossessions. This means higher opportunities for investment projects. If you have decided to do business in the real estate industry, ensure that you have a solid business plan in order to obtain lender financing. Most real estate investment lenders will make their financing decision based on numerous facts, including your business plan proposal.