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Types of Investing
Cash
The person investing in a property has the full amount the home is being sold at or the offer was accepted at, in the bank. Proof of funds will be required upon a buyer offering to purchase a home. No lenders are included in this type of transaction.
Seller Financing
It is recommended a lawyer review all documentation for seller financing before a buyer purchases a home. Seller financing will be between the seller and the buyer. The seller will outline the required down payment, purchase price, length of the terms for payoff, and the monthly payments required by the buyer. Buyer does not fully own the home until the total amount of the purchase is paid in full.
Hard Money Lending
A lender is involved. Terms for purchase are shorter. Usually maximum 6 months for the property to be flipped and resold. Interest rates are higher and the down payment varies depending on the AMV of the home being bought. There is a required minimum amount that must be in the buyers’ bank account for the Hard Money Lender to approve financing.
Silent Investor
A buyer finds a silent partner to cover the cost of purchase. The buyer agrees to pay the silent partner a monthly mortgage payment, possibly a down payment, and a percentage back at closing. Terms are laid out between buyer and silent investor on the length of time needed to flip and resell the property.
What is an ARV?
(ARV) After Repair Value
The estimated value of a property after completed renovations, not in its current condition. House flippers commonly use ARV as a way to gauge the worth of a fixer-upper property, including how much it can be bought, and then resold for after repairs.
How to Prepare for Investing
