My dad is big on real estate investment and has been pushing me for years to invest in some properties so that my finances stabilize by the time I finish college. I followed his advice a couple of years ago. I bought an apartment in Florida and now I want to investigate investing in real estate properties nationally and internationally. I wonder if there is a way to finance this without having to use all my capital and how to go about managing the project from afar. Do you have any helpful ideas or suggestions?
It seems like you got off to a great start. Congratulations on your first investment! The first one is often the most gratifying and rewarding. It involves a bit more as it is the first experience; therefore, the investment tends to be significant. The experience is also the beginning piece toward creating a portfolio of investments that have the potential to make your finances sound and independent. Investing in a property, and from afar, does raise some challenges; but, the fact that the investment is elsewhere is a wonderful way of diversifying risk.
The first property comes from a Federal Housing Administration (FHA) loan. The government and backs and insures these loans through the Federal Housing Administration, which is a branch of the United States Department of Housing and Urban Development (HUD). The borrower pays the mortgage insurance, which protects the investment in the case of default. These loans need a 3.5% down payment and need a minimum credit score of 500. I would venture to guess that your first property was an FHA loan.
For the second property, an FHA loan would not be possible. One alternative is to buy the property by paying the entirety of the value in cash or cash alternatives. The advantage of this method is that the transaction is quicker as it does not need the paperwork that goes with most loans. Also, the property would be cheaper overall as it would not produce interest costs. However, if you have limited capital, you would tie said capital to one investment. This limits future moves until more capital becomes available.
Another alternative is to opt for a conventional loan. These often need a 20% down payment and need a higher credit score. Conventional loans have a lower interest rate and give the ability to obtain a property without large sums of investment capital tied to a single investment. These loans have some restrictions and requirements, because financial institutions sell and trade loans. To do so, the banks must ensure that the loans meet certain prerequisites. These loans must also conform to the limits placed by the Federal Housing Finance Agency (FHFA) to qualify as Fannie Mae and Freddie Mac-eligible loans. However, Conventional and FHA loans would not be available for international properties.
The next alternative is hard money loans. Although these loans have a higher interest rate, they’ve become a valuable resource used when time is a critical factor. Keep in mind that conventional and FHA loans often take up to 60 days or longer to close. When dealing with investment properties, you may not have that much time. In these cases, hard money loans, such as fix and flip loans Florida, become available to ensure that you do not miss out on a great opportunity. Other alternatives, such as non-bank mortgage loans, hybrid financing, second mortgages on an existing property, and portfolio lenders, give lending services for investors. Make sure to read the fine print and understand the intricacies of each loan style so that it fits your investment needs, for the international investments.
Managing any project from a distance often proves challenging. As with any type of relationship, the key is communication and trust. The wisest move is to hire a trusted professional and delegate. This does not mean that you do not follow up or communicate. Although the idea is that you should have enough time to enjoy some coffee, while work is performed, you do need to be aware of what is going on with the property. Therefore, hire and allow the person to do their job and stay in touch, so you know each phase of the project. You should consult important decisions; however, you also need to give room for decision-making so that the project does not stall at every minor predicament.
If you want to invest in various parts of the world, you must build a team you trust and depend on. The more you think and treat this as a business, the more effective and successful you become. It is a business, and you’ve become the leader and Chief Executive Officer (CEO). At the very least, your team consists of a real estate agent, a mortgage broker, and a lawyer. If you build property, the team may grow to include other specialists such as constructors, contractors, and individuals that understand how to obtain required permits. Keep in mind that the team may look a bit different depending on the country in which you invest. Not all countries have the same processes for real estate.
The larger the project, the more probable it is that it often falls victim to scope creep, budget overruns, or schedule overruns. Whether you turn to hiring home builders in Queensland or hiring expert real estate agents to scout for potential investment property, break the project down into smaller and more manageable pieces. Designate a responsible party for each of the pieces and create a schedule for follow up meetings where you obtain enough information that you understand the important points. Use video conferencing tools that streamlines communication. We find this type of technology to be of indispensable need because it gives a way to visualize the parties involved and focus on body language and unspoken communication.
Investing is an exciting venture that produces countless riches while also being enjoyable. Most talented and successful investors stress the need for discipline, work ethic, communication, and education. Make sure you learn as much as possible about the investment and the related aspects of the investment. Do not let anything surprise you. As you invest, you continue to gain experience and insight. However, avoid mistakes by finding experts and people that experienced into what you venture. Ask many question and listen to as many of these experts as possible. In the end, the decision is always yours; however, making the decision with the greatest amount of information available increases the likelihood of success.