Seven Common Borrowing Mistakes for Property Acquisitions

Property acquisitions are a great form of consistent revenue generation. However, not everyone has the capital on hand to purchase properties without assistance. 

 

Many investors in the early stages of building their portfolio will have to borrow money to complete their purchase. Rushing into a borrowing agreement, though, can spell disaster for your portfolio.

 

Here are seven mistakes to be aware of before borrowing money for a purchase.

 

1. Focusing only on the interest rate

 

Interest rates may scare a lot of first-time borrowers, but they shouldn't be the sole focus. Once properties are rented out, thr revenue stream can be used to pay loans down quickly, limiting how much you'll pay in interest.

 

2. Not having sufficient liquidity 

 

Don't take a loan out based solely on assets that are already in use. Properties you purchase often won't immediately generate revenue, meaning you'll need to have sufficient liquid assets at your disposal to help with early loan payments. 

 

3. Not having personal financial statements prepared or complete

 

Any lender will ask for your financial statements before considering a loan. Make sure all your financial statements are prepared and ready to present.

 

4. Not having experience with a similar property type

 

Not all properties are the same. Office and retail properties are managed differently than residential or multifamily properties. Research which property type you want to acquire before making your purchase. 

 

5. Picking the wrong lender

 

Another area to research is what lender to use. Make sure to choose one with a good reputation and compare their terms with other lenders to find the best opportunity.

 

6. Accepting your first offer

 

Don't just accept the first offer that comes to you. Take time to evaluate all possible options to find the best offer for you.

 

7. Allowing too little time for closing

 

Closing can take weeks for lenders to go through all the paperwork and inspections of the property. Make sure to allow for adequate time for a closing so that the purchase window doesn't pass you by.

by Kevin Romney

Camino Verde Group – Las Vegas