A loan on secured by Miami real estate collateral is typically known as a mortgage. This is the most popular form of real estate investment loan used by investors. Miami real estate investments provide an opportunity to generate cash flow. Apart from commercial banks, savings banks, savings and loan associations, credit unions, real estate investment loans can also be obtained from insurance companies, mortgage bankers, mortgage trusts, investment trusts, pension funds and finance lenders. Private individuals sometimes offer real estate investment loans as well.
There are two types of Miami real estate investment loans, namely, residential loans and commercial loans. Property that is solely used for business purposes like malls or industrial parks would be termed as commercial real estate. Commercial loans include buildings, warehouses, and stores. These properties are generally five or more units. Property that is solely used for single unit housing purposes is termed as residential real estate. Residential loans include those properties that are bought for rental income and future appreciation. The borrower initially receives a lump sum from the lender, which has to be paid back in installments. Purchasing a Miami real estate residential property involves having significant funds. Before qualifying for an investment loan, three main factors are considered: investor’s income, credit scores and reserves. In order to qualify for a loan, there are five basic essentials: interest rate, terms, payment, final value and principal. Loans can carry a fixed interest rate or rates that vary with market conditions. Some loans have negative amortization periods; investors should be cautious of such loans.
Miami real estate investment loans comprise of interim loans, short-term loans and long-term loans. Apart from commercial and residential loans, the other types of loans that are offered are construction debt, permanent debt, equity financing, structured financing, interim financing, mezzanine financing, foreclosure investor money, hard money loans and residential repair funding.
Investors may not need perfect credit scores to qualify for real estate investment loans. Bad credit real estate loans are designed for those individuals who have a less than perfect credit report. It is a type of sub prime mortgage and is a higher risk to the mortgage lender because of the past credit history of the borrower. Bad credit loans allow individuals to obtain a mortgage for buying real estate when other more conventional mortgage lenders or banks may have turned them down.
The longer the tenure of a loan, the higher the interest rate will be. A 30-year fixed loan will have a higher interest rate than a 2-year fixed loan. But people generally opt for a loan with a shorter-term fixed option, as the rate of interest is lower and hence the monthly payment is lower. To get a loan there are no pre-determined limits set for the real estate investor.
Some Miami real estate investors tend to prefer in marketable real estate assets. Buying shares in a real investment trust or REIT is one way to do this. Investment loans can be used to partially fund such investments and the REIT shares are used as collateral to secure such loans.