Providing city-like facilities and inexpensive rents and costs of living, Buffalo has been a popular destination lately for those seeking to live on a budget. Since the pandemic, Buffalo has seen the highest inflow-outflow ratio of homebuyers in the entire US. As of September 2022, Buffalo home prices have gone up 15.1% compared to previous year, According to Redfin.
This has resulted in a huge surge in demand in housing and created the perfect opportunities for investors to invest in Buffalo, NY to make good returns.
Now, you might be wondering, “How to finance real estate investment deals in Buffalo?” Well, this article aims to directly answer this question. Here’s what you would need to consider before beginning your financing journey:
Use Cash to Finance Your Property
While we understand a lot of people do not have the luxury to finance a property with cash, however if you do have the resources then you could purchase the property right away by paying the full amount upfront.
Financing properties with cash has lots of benefits like: strengthening your investment deal with your seller, cutting down additional costs that associate with interests that come with financing a property with bank loans or hard money loans etc.
However, it also limits your opportunity to leverage other financing options that might give you more returns than financing with cash. Financing with cash is generally considered a safer option and not for someone who is willing to take risks and possibly gain a higher reward for it.
Hard Money Loans
Hard money loans, also called bridge loans tailored for investors who do not want to go down the path of conventional financing. The term “hard” refers to the idea that the loan is secured by a hard tangible asset and oftentimes the property itself. Hard money loans are fast and require less documentation to get approved. Hard money loans work exceptionally well for fix and flip investors who like to buy a house, renovate and like to sell it fast with a healthy profit in hand.
It is also very important for an investor to find a suitable private lender who specializes in lending hard money loans because finding one in Buffalo is pretty hard. To relieve you from that hurdle, Buffalo Investing is a professional and experienced private lender that offers hard money loans through a streamlined and transparent financing process.
Conventional Financing
When we talk about conventional financing we generally mean borrowing money from banks which is the most common way of financing any investment deal. Unlike hard money lenders, a financial institution would lend money to borrowers who have had successful credit history, managed to keep a good debt to income ratio in the past. Bank loans have lower interest rates than private lending or hard money loans therefore, you could save a lot of money if you finance your investment through bank loans.
However, getting conventional loans is difficult, and usually requires a long list of protocols and procedures to get approved, especially if the property you’re aiming to acquire is distressed. Therefore, for someone who is looking to close the deal fast, this might be a significant hurdle to overcome.
Private Lending
Private lenders are a great alternative to conventional financing. They are more flexible in their requirements for approval and are willing to provide funds for your investment if they deem it to be profitable. For someone who does not have a decent credit score should highly consider financing their investment deals through private lending.
On the flip side, private lenders charge a high amount of interest rates from their borrowers, and typically require a previous working relationship and a solid track record in order to consider you.
Which Route Should I Take?
THis is completely a valid question to ask when seeing so many options someone can choose to finance their investment deals. The answer depends on your needs.
When choosing a type of financing for your investment deal, you should be asking two things to yourself, 1. What is my current financial situation? 2. What do I want to do with the property I am looking to buy?
If you have good resources available to you, you can always go the cash route. Private lending is also a good choice for someone who is looking for flexibility or wants to close the deal fast.
Hard money loans are absolutely great for fix and flip investment deals and the ones you should be giving your attention to if you want to invest in the Buffalo real estate market. There are a ton of distressed houses in Buffalo that are perfect for buying, renovating, and selling for a profit.
Conventional banking is the ideal choice for people who want to enjoy a low interest rate to maximize their profits and can meet the strict requirements imposed on these loans.
Conclusion
Choosing the best way to finance real estate can seem daunting at first. The above financing opportunities all have their respective pros and cons. However, if you are aware of your financial capabilities and have a solid plan, Hard Money Buffalo is always at your service. Contact us today to get started.