Real estate is one of the complex industries with many different stakeholders and agencies. Understanding how this industry works requires some time and effort, but it is worth it even if you are not planning to work in the industry. Even as a buyer or seller of real estate you should know the ins and outs of the industry as well as home financing. Below we look at some basic concepts of the industry. We also show different ways you can obtain home financing.
New Building Construction
It’s part of the gross domestic product (GDP, the total final value of goods and services that a country produces locally per year). Residential, Commercial, and Industrial buildings are examples of real estate. The value of real estate construction in 2018 was $1,15 trillion, representing 6.2% of U.S. GDP.
New Home Buildings
It’s another residential type of real property, including condominiums, townhouses, single-family homes. If you need information about monthly data on home sales and the average price of houses, visit the National Association of Home Builders website.
Real Estate Agents
They’ll assist homeowners, businesses, and investors buy and sell all forms of properties; residential, industrial, etc. Each real estate agent specializes in one or some of the real properties. You can find out more at Los Angeles Real Estate and real estate experts like Steven Taylor Los Angeles with online searches.
Seller’s Agents
If you’re selling some property, you can contact a seller’s agent to find buyers for you. Besides pricing your real estate, they’ll ensure that it’s in good condition and attractive to potential buyers.
- Buyer’s agents
On the other hand, a buyer’s agent is useful when you want to purchase a property. Other services they’ll offer include finding a property based on your budget, negotiating on your behalf, and helping with surcharge legalities (title search, inspection, and financing)
Two Ways of Financing Your Investment
1.Traditional Mortgage
It’s the most popular investment property loan that requires the borrower to make a specific deposit before a bank provides you with the rest of the money. The conventional mortgage has low-interest rates, but loan approval is strict. It’s because you must have the required deposit payment, a good credit score, and a low debt-to-income ratio; it shows the balance between your income and debt; a lower ratio improves your chances of getting a line of credit. These restrictions may eventually discourage some investors from using mortgages to finance investment.
If you’re thinking of a short-term loan to finance a property purchase, then a mortgage is ideal for you. One advantage is that you make monthly payments, giving your budget some flexibility. Also, if your goal is to acquire own-and-hold property, a traditional mortgage would be a good choice.
- Seller Financing
Instead of going the route of a mortgage loan, you may secure a loan from a property seller. It’s known as owner financing and has less paperwork and formalities compared to a conventional mortgage. Seller financing has two options; one, the seller can make the down payment on your behalf or absorb the whole purchase price.
Before you commit yourself to finance your investment through owner financing, ensure that the interest rate is reasonable and within your financial ability. The agreement must be in black and white.
