Real Estate Loans

A loan on real estate that is usually secured by a mortgage is called real estate loan. Real estate investing runs the gamut in terms of risk and investment success. The first rule of real estate investing, even before location, location, location, is be very careful with whom you are dealing.

If you are seriously considering investing in real estate property, it means essentially that you will need: 

• Investment capital, or a legitimate means of attaining some without putting yourself in debt.

• A good knowledge of the real estate market and the neighborhood in which you are looking to buy property.

• Good management, people and negotiating skills.

• The ability to do repair work or access to people who can do it for you.

• The name and number of a property inspector or engineer.

Unless you are able to find, evaluate and buy houses that are either in foreclosure or fixer-uppers, which can be turned around quickly, you will most likely serve as a landlord for the property while it increases in value. Be careful to whom you rent because your property must be well-maintained. 

Tips on Home Buying and Selling: There is a lot to know before putting your home up for sale or starting your search for a new home. 

Take the following into consideration if you are a buyer:

• Work with qualified lenders
• Get pre-approved
• Look for a neighborhood first
• Make a wish list

If you are selling your home, keep the following in mind:

• Sell it yourself
• Think improvements
• Be careful with promises
• Set a fair price
• Check out a real estate agent

Types Of Real Estate Loans: There are 2 basic types of real estate loans:

1. Commercial Real Estate Loan: This loan can be used to buy, improve or refinance commercial property, if you own 50% or more of the real estate. National standards require a commercial loan for any property with more than four units. With a commercial loan, the property and its history of making money top a lender's list of criteria. Buyers will need to show lenders at least two years' worth of tax records and/or profit-and-loss statements from the building to demonstrate its success as a "business enterprise." They will also have to make a higher down payment -- a minimum of 20% to satisfy commercial-lending requirements, and borrow at a higher rate. For small investors, interest rates may be about one percentage point higher than residential mortgage rates. Commercial loans, unlike many residential loans, are rarely arranged at fixed rates or for 30 years. Buyers using a commercial loan pay anywhere from $1,000 to $2,000 for a property appraisal. That's because a commercial appraisal evaluates both the building's structure and its "financials" -- vacancy rates, whether it's self-supporting, and how it competes with similar properties in the area. 

2. Residential Real Estate Loan: This loan can be used to buy, improve or refinance residential property. New investors stick to residential loans when making their first property investment. After that, they might consider diving into a larger building requiring a commercial loan. However, a group of small investors might successfully pool together to buy property via the commercial route. Individuals who have a lot of cash but poor credit scores also may be more likely to secure a commercial loan, since commercial lenders place more emphasis on a building's potential to make money than on the individual buyer's credit history. For a residential loan, a buyer's credit history, the ratio of loan-to-value and cash reserves are major criteria. Buyers of up to four units can tap a wide array of loan packages just as they can for a primary residence. Thus, they don't have to tie up a large sum of cash for the purchase. Interest rates track the residential mortgage market, which as of August 23, hovered around an average 5.43% for a 30-year fixed loan. Buyers using residential loans pay from $200 to $400 for a property appraisal.