Around & Around We Go

predictions_2If you have currently decided to invest in the vast opportunities available in real estate at the moment, the first thing to consider is that you need to have your financing securely in place before you can move forward. Now is an awesome time to invest, as there are so many bank owned properties, foreclosures, and pre-foreclosures out there.

Even though it is December, it is very much apparent that people are basically not able to afford the homes they originally purchased and are losing them left and right. If you have the right funding in place, now is definitely the time to invest and there are a variety of ways to go about when seeking to secure a deal.

Many real estate investors have been recently establishing their financing through revolving accounts. Whether it is through a bank or a credit card, revolving accounts have increasingly become more substantial in the buyers’ market. A revolving account is a type debt associated account where the balance that is outstanding does not have to be paid in full. Rather it is paid in installments, usually on a monthly basis. The borrower is required to make a payment that is dependant on the balance on the accounts. These payments are generally calculated with minimum interest rates and also with no property reduction included.

What a revolving account involves are the customer, the billing cycle, a credit card, and a creditor. The customer is the borrower who has accepted the account and all of the conditions associated with it. The billing cycle is the interval between each billing cycle and when each payment is due. The credit card, whether it is through a bank or other credit card company, is the actual confirmation of the money loaned. It can be in the form of and identification, a check, or other written request that allows the customer to obtain access to the revolving account.

A creditor is the authorized lender who honors the loan amount or extends the credit limit amount. A creditor can be a bank, credit card company, or other party acting on the lender’s behalf. An agreement is established between the lender and the borrower, or customer that provides for the use of the funds.

One such revolving account is a home equity line of credit (HELOC). Qualification for such a loan is a direct result of the amount of equity a homeowner has to offer. He/she can use this home equity as collateral on the loan. It is basically a bank credit card that is secured by a mortgage or deed of trust on the borrowers property. Many times it is taken out as a second lien on an already existing loan.

In addition to assisting individuals dealing with debt consolidation, financing via a HELOC is also beneficial to real estate investors, especially those purchasing real estate owned properties (REOs) and properties in foreclosure. Although it is often more of a high interest loan, it does offer the advantage to the borrower of receiving money fast. One major component to remember if opting to receive financing through a home equity line of credit though, is that it is directly attached your property, and failure to make the payments will inevitable result in loss of your house.

The most commonly used revolving accounts are those available on credit cards. A revolving credit card account incorporates a type of credit that does not define a fixed number of payments. Using credit cards to secure financing is another option that has proven useful to many investors. Credit card holders have the choice to either take out a cash advance or even borrower money from their accounts with checks.

It is genuinely an easy and uncomplicated process, but tapping into the funds that are available to you on a credit card does have a downside. This is because it usually requires a high transaction fee and/or interest rate. On the other hand, advantages of obtaining money in this way include allowing the customer twenty-four hour access to his/her funds.

Also, because the loan is an unsecured loan, other costly factors such as title insurance, appraisals, and inspection costs are eliminated. Receiving financing using this method would be the most cost effective in a real estate investor was planning to incorporate it as a temporary means to an end.

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