Property Management Blog

How to Finance Investment Property

System - Wednesday, March 27, 2024
Property Management Blog

In today’s market, there are several new investment options such as financial vehicles, digital currencies, and options. However, real estate has withstood the test of time and is still one of the preferred investment alternatives.

Real estate is a stable asset that ensures you enjoy consistent income throughout the investment period. In addition, you can enjoy consideration value appreciation given that you have invested in the right area. Also, there are tax benefits to take advantage of at the end of the financial year.

In this article, the team from SGI Property Management Phoenix breaks down the various methods by which you can finance your investment. Keep reading to learn more!

Bank Loans

The first option available to a significant percentage of the populace is bank loans. It is the most conventional way of getting financing. Freddie Mac or Fannie Mae set guidelines that a conventional bank loan would confirm.

Most financiers would require a 20% down payment for a residential home. Investment properties are considered riskier and thus the financier would request that you put down a bigger down payment, 30%. 

It goes without saying that your credit history and credit score will contribute significantly to the possibility of your mortgage being approved.

Hard Money Loans

Conventional mortgages are long-term loans that would be ideal for single-family or multi-family residences. Hard money loans are better suited for investors looking for fast, short-term returns from the property industry. This is a short-term loan that is mostly utilized by individuals and households looking to flip houses.


Hard money loans are easier to secure and quality than conventional loans. This is not to say that the financier would not consider important issues such as credit and income. What would be their main point of focus would be profitability.

While this sounds all rosy, hard money loans do come with a sizable concern; the rate of interest. Due to its risky nature, financiers offer double-digit interest rates for such loans. You can easily find a loan at 20%.

Private Money Loans

Private money loans are often the easiest to secure since they are from one individual to another. Apart from close friends and relatives, you can be able to secure private money loans from investors and real estate gurus.

Make use of real estate networking platforms, clubs, and events. You will get in touch with experienced investors whom you can try to befriend. Most importantly, you can also leverage their experience in the property market industry to navigate the challenges of investment.

Financing Tips

Now that we have outlined several options that you can consider, let’s go through some financing tips that have served our clients well in the past.

The Down Payment

Typically, the lender or mortgage company will request that you put down a down payment. Traditional finance companies will ask that you put down around 20%. We recommend that you put down a bigger down payment, probably around 30 to 40%.


While you might have your finances in check and a good credit score, financiers are always pessimists. A bigger down payment gives you more leeway and you can present yourself as a more stable borrower. You can secure better terms for yourself in such a scenario.

Power of the Credit Score

Financiers would like to be reassured that you are the best choice possible for their money. They would seek this reassurance in metrics such as the ‘credit score’. As you consider purchasing property, build up your credit score with prompt and full payments of your loans and other lines of credit.

Local Banks

Investors and borrowers often turn to multinational banks or national brands because of their established business. However, this is not always a good thing. Big brands often have their agenda, which comes in the form of less flexibility and more strenuous rates.

Local financing can be a good option. They would be more flexible and can give you good terms to match your investment needs.

Owner Financing

As much as it is available, credit can be hard to secure. Financiers are always tightening their standards which can work against you. A good alternative that you can consider is ‘owner financing’. You would have to prove to the owner/ seller that you are able to make the payments just like any other financier.


As a potential property investor, you just don’t want to invest in any kind of property. You want one that will perform well over time. This requires that you put in a considerable amount of time and effort in the research and selection of the property. You will need to research the regional economics, the law, demographics, and so much more.

Most property owners think of management as an afterthought. Management is a vital part of the investment process and has the potential to make or break your investment. For the management of your Phoenix property, get in touch with the experts at SGI Property Management Phoenix.

With us as your property partner, you can move around with confidence knowing that your property is in the best hands in the area. Contact us today and receive a quote for our property services.