Real estate is one of the most solid investments you can make. In contrast to other options, investing in property is much more risk-averse, and it provides you with actual value. Instead of leaving your money in a bank account or in stocks, you can actually use your investment while it increases in value – either by living in the property yourself or renting it out for additional income.
One of the biggest misconceptions about real estate is that you need large amounts of capital to get started. Yaris Derums is the owner of the Australian-based Mango Credit, and he is quick to remind people that real estate is not as unattainable as they might believe:
“There are plenty of additional options for funding if you want to invest in real estate. You don’t always have to go down the mainstream route with big banks and normal mortgages/loans,” Derums explained.
How Does a Caveat Loan Work?
A caveat loan doesn’t require a credit check; you simply need to own real estate worth at least as much as what you need to borrow. Repayment terms are flexible and convenient, ranging from interest only payments to principal and interest, depending on what works best for you. Normally the term is between two and twelve months.
The application process is simple, and you will receive approval in as few as two hours. Funding can often be completed three days after the approval. Besides their convenience, simplicity, and flexibility, these loans can provide a real solution to an investment opportunity.
There are different investment property opportunities that appeal to different people. You may want to purchase a home that needs to be fixed up. As long as your real estate collateral has enough equity, you can borrow the money to purchase and renovate the investment property. Once you sell it, you can repay the loan.
Another option is to purchase a commercial property. You may find one that already has a built-in tenant, and you know that you will receive income as soon as you close. This is a great time to use a caveat loan, as you already have the income in place to repay the loan. Once the loan is paid, the profits all belong to you.
Using Short Term Loan Caveats for Real Estate Investments
One of the most obvious alternative methods for real estate funding is a short term loan caveat. While a regular mortgage loan requires a credit check, a short term loan caveat does not.
Yaris Derums reminds potential investors that this type of loan is quite easy to achieve, under the right circumstances: “As long as you already own property with a value equal to or above your target real estate investment, you can easily obtain a short term loan caveat.”
As the name suggests, short term loan caveats operate over a short period of time compared to a typical mortgage loan. Also known as a “bridging loan,” this type of lending service can be finalized and approved in a matter of days – not weeks.
Generally speaking, these types of loans are an excellent opportunity if you’re waiting on additional funding. For example, you may be finalizing the sale of another real estate property, and you want to purchase another property before waiting to close the deal. Or maybe you know that you’ll earn significant rental income immediately after purchasing your property, allowing you to pay off your bridging loan over a short period of time.
Finding the Right Short Term Caveat Loan for You
Searching for a lender that fits your specific needs in important when exploring alternative options for real estate investment funding. There are many features that you should look for when assessing various loan providers.
Yaris Derums recommends that investors “search for lenders that offer transparency first and foremost. Make sure the lender is completely up-front about the fees, costs, and charges. The last thing you want is a nasty surprise a few months down the line.”
The founder of Mango Credit also stresses the importance of what he calls “right-size financing.” In a nutshell, this means you’re not just being offered the maximum amount you qualify for, but rather a loan that actually makes sense for you financially.
It always makes sense to “think outside of the box,” and there are a number of innovative solutions available to you if you’d like to invest in real estate. Remember, this is one of the best investments you can make – so don’t let arbitrary barriers get in the way.
The Value of Flipping Investments
There is a great deal of potential for profit in the home flipping industry. Most people just don’t have the extra capital to get in the door. There are homes for sale that are slightly distressed, but with a little work, they can be transformed into somebody’s dream home. Even if you take out a mortgage, you won’t have the cash for the renovations. With a caveat loan, how much you can borrow is based on the value of the real estate you put up for collateral. In essence, as long as your real estate has the equity, you can borrow enough to purchase the investment and make the necessary renovations.
Once you flip your first home, you may have extra money left over. You can continue to build on this process, borrowing less money each time. Eventually, you will be using your profits to make more profits without the need of a loan. A caveat loan is the tool that can catapult you to this level of financial freedom.
For example, a few days before Christmas, Cricket Captain Steve Smith moved into his new home, which he purchased from Yanis Derums, owner of Mango Credit. Derums purchased the property in 2008 and has almost doubled the value.