How to Finance Your Property Investments?

Reasons why people invest in properties

There are basically two reasons why people invest in properties. The first reason is to buy a home or apartment with the intention of living in it. By living in your own apartment, you save on costly rents and at the same time, the value of the property increases as time progresses. On the other hand, there are many people who look at investment in properties, from a commercial angle. Their main objective is to buy properties, give them on rent or resell them at a profit over a period of time and use the profit and original investments for newer and more expensive properties.

Funding your property

There are basically four types of properties i.e. house, land, building and apartments. When it comes to raising finances for buying such properties, there are only two options available. You either fund the property entirely through your own resources or take loans from financial institutions for the purpose. While investing your own money saves you from interest costs, arranging such huge sums of money may not be possible for a majority of people who wish to enter this market. Hence, if you wish to invest on properties, you have to make your mind clear as to which option you would like to choose.

Be sure of every fact before you invest your money in property

Though self financing is the ideal way to go about buying properties, you will have to take into account the risks involved and also the benefits that will come your way. You have to bear the entire investment cost, look for a customer either for sale or rent. If you are looking for rental incomes, you should be in a position to recover your investments, over a period of time. While this will certainly save you a lot of money by way of interest, not all people can choose this option. Before you invest your own money when buying properties, it is always important to be sure about the clean title of the land. You should also be more than certain that all legal angles have been taken care of.

On the other hand, if you go in for financing your property purchase, you have to look for a lender who would be willing to fund such investments. Raising money through this route is known as loans or mortgages. However, banks and financial institutions will not fund the entire cost of the loan. At best, you can expect the banks to fund around 85% to 90% of the purchase value of such properties. The balance 10 to 15% has to be funded by the buyer as a deposit.

Furthermore, the property is secured in favor of the lender by way of clean mortgage. Much like any other loan – such as business loans, cash loans, etc – the interest rates charged for such loans vary and would depend on the rates that are fixed from time to time by the government and the central bank of the country.

You can also take the help of a partner who is likeminded, trustworthy and who is willing to invest in such property investment projects. It is usually a good deal provided both the partners are true to each other. It is better to have such partnership agreements registered where everything is mentioned clearly in no unambiguous terms. 

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