If you’d like to invest in real estate and are looking for working capital to finance your deals you may be interested in asset-based lending. In simple terms, this is a type of loan which is backed by your current assets such as rental income and/or already-purchased properties. Asset-based lending is quite popular in Canada as it enables further investing in the real estate market.
The collateral used for this type of loan will be your existing real estate assets and/or rental incomes rather than any of your personal property. This means it’s important that all of your financial information and documents pertaining to your assets are as accurate and up to date as possible. Any real estate would need to get a full appraisal completed in order to determine it’s current value.
When Asset-Based Lending is a Good Idea
If you’re investing in real estate on a regular basis or need money quickly, then an asset-based loan is seen as an ideal source of financing. Timing is often crucial when it comes to investing in real estate and many opportunities are missed because potential buyers didn’t have enough time to acquire adequate financial backing. An asset-based loan allows you to purchase additional real estate without having to involve any of your business or personal capital. As long as you have the right assets and equity available for collateral, this is a reliable way of borrowing money. The process is typically prompt and short, which is important when time is of the essence.
Asset-Based Loan Benefits
For some lenders, you don’t really have to worry about your current credit rating when applying for an asset-based loan since your assets and/or cash flow of property are used as the collateral rather than only your personal income. There are lenders available in which their number one concern isn’t your credit score as long as you have the assets to back up the loan. If you’re investing in real estate as a business, this type of loan can be an ideal way to expand it and build up your inventory. An asset-based loan also allows you to cut down on any potential cash flow difficulties since you don’t need to dip into your savings or other investments in order to fund the purchase, so long as the equity is readily available in your current real estate.
Potential lenders will typically analyze your assets or cash flow to determine if you qualify for a loan. This is usually done by verifying any rental income and then subtracting the typical property expenses including current mortgage held on the property, maintenance costs, insurance, heat and real estate taxes. This gives the lender a more solid picture of how much cash flow is left over for monthly payments.
If you’re interested in more specific information regarding asset-based loans or any other type of mortgage or financing assistance, please contact our professional team of experienced agents at MortgageMeister.com. We’ll be glad to help you obtain the right type of financing for your personal and unique situation and seek out the best terms and rates available.