Popular television shows make real estate investing seem easy with guaranteed profits. What these shows don’t show you are the behind-the-scenes tribulations that investors must go through in securing and rehabbing properties.
If you’re just starting out in the world of real estate investing, understanding how to finance your purchase can make a big difference in your success. Here are three effective financing strategies for investment properties in Oregon that can help you minimise financial pressure, secure better loan terms, and increase your overall profitability.
1. Consider Financing That Includes Rehab Costs
Most investment properties require at least some level of repair or improvement before they’re ready to rent or resell. Even properties in relatively good condition often need updates such as painting, minor renovations, or safety upgrades to make them appealing to tenants. On the other hand, distressed properties may require a full-scale renovation or structural rebuild.
When planning your investment, it’s essential to factor all rehabilitation and renovation costs into your budget. If the expenses are substantial, consider obtaining a professional contractor’s estimate to get a realistic understanding of the total cost. Some specialised mortgage lenders and programs, including certain FHA renovation loans, offer financing options that combine both the property purchase and construction costs into a single loan.
This type of financing not only ensures you have the funds needed to complete the project but also keeps your loan consolidated under one payment — often resulting in lower interest rates and easier management. Whenever possible, aim to preserve your personal cash reserves, allowing you greater flexibility for unexpected expenses or future investment opportunities in Oregon.
2. Make a Large Down Payment
It may sound obvious, but many first-time real estate investors assume they can purchase an investment property with just 0–5% down. While a few lenders might offer such terms, they are typically reserved for experienced investors with strong financial histories, additional assets, and proven track records. Even then, the interest rates on these low-down-payment loans are usually much higher.
Lenders consider investment properties to be higher-risk assets because, in times of financial difficulty, owners are more likely to prioritise payments on their primary residence over an investment property. For this reason, most banks require a minimum down payment of 20% or more. A larger down payment not only reduces your risk but also often results in more favorable interest rates and loan terms.
It’s also important to retain sufficient personal savings to cover unforeseen expenses and to ensure you have the funds needed to prepare the property for tenants or resale.
Many savvy investors use a home equity line of credit (HELOC) on their primary residence to fund a substantial down payment on an investment property. Once the new property is financed, they refinance and pay off the HELOC. This leverage strategy allows investors to maximise their purchasing power while managing cash flow effectively — a common and effective tactic in real estate investing in Oregon.
3. Ask for Owner Financing
One often overlooked investment strategy is owner financing. While most buyers today secure loans through banks or other financial institutions, historically, it was common for property owners to finance sales directly.
In certain cases, you may discover investment properties where the owner is willing to provide financing. This often occurs when the owner owns the property outright, is downsizing, or has inherited the property and wants a steady income stream rather than a lump-sum sale.
Owner-financed deals typically involve a short-term loan, a moderate down payment, and fixed monthly payments over an agreed-upon period. While these arrangements can offer favorable terms and reduced competition, they are relatively rare. It’s always worth asking property owners if they are open to financing, as this strategy can provide flexible options for investors looking to maximise returns in Oregon.