When you add real estate to your investment portfolio, the next question to ask yourself is how you will fund your endeavor. Depending on your goals for the property, the risk level you want to retain, and your current financial situation, you might choose to go through a different financial route compared to your fellow investors.
Whether you choose to invest in real estate through cash, a private lender, a hard money lender, or a conventional bank loan, you will find that each comes with its own benefits and drawbacks. What you choose can depend on your investment goals. The most common questions are between short-term loans and all-cash deals.
A short-term loan can be great for those looking for quick funds and a fast payback time. Since they are a shorter commitment, many lenders are more likely to approve the loan. For the one obtaining the loan, this type requires a shorter payback period, which can mean that while interest might be high, you are paying it back quickly to get less interest accumulation.
Short-term loans are usually paid back within six months to a year as they are less than what can be acquired through a long-term loan or other financial option. These loans can come from hard money loans, payday loans, lines of credit, and many other options depending on the investor’s risk level and financial needs.
Pros and Cons Of Short-Term Loans
- Shorter time to accumulate interest
- Quick turnaround time for loan acceptance
- Fewer documentation requirements to earn a loan
- The amount of the loan is smaller than other types of loans
All cash deals refer to any purchase when the asset is exchanged for all cash. With that being said, all-cash deals are usually done through a wire transfer or check. Either way, an all-cash deal leaves out the option for outside financing or potential wait times from third parties. This type of deal can help both the buyer and the seller quicken up the sale and avoid any additional hassles, such as outside financing or inspections.
This can be one of the quickest ways to buy and sell a property. If you were to get a loan from a bank, extra steps might be required to get approved for the loan, such as an inspection of the desired property. This can stretch out the time it takes for the seller to sell and for you to have your bid in before other applicants. An all cash-deal can benefit both parties.
Pros and Cons of All-Cash Deals
- Quick sale turnaround
- Avoid the other financial and bidding processes
- You must have the full amount of the property available
- There is no certainty that the buyer will agree
There are many financing options available regarding your real estate investment. If you are planning on adding real estate to your portfolio and want to learn more about how short-term hard money loans can get you there, reach out to the team at KC Investor Funding.