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Banks offer a variety of mortage loans and products. Getting a loan through a bank is the most common method of financing properties but not all investors qualify. If you have steady income that you can prove (W-2 forms from your employer), have a good credit score (680 or higher), and have a down payment (20% or more), you have the greatest chances of being approved for investment property loans through a conventional bank.

• Fixed: Both the interest rate and the monthly payment are fixed.
• Flexible rate: Both the interest rate and payment are flexible and change according to market prices and situation.
• Interest only: Borrower pays only the interest on the loan for a number of years and during that time none of the principal is paid off.
• Balloon mortgage: Both the interest rate and the monthly payment are fixed for a certain length of time, but at the end of the short-term loan, a much larger "balloon" payment is due for the balance.
• Assumable mortgage: Both fixed and flexible rate mortgages can be assumable. A borrower simply takes over someone's else's payments and becomes the new owner. The original owner gives up their ownership of a property without the new borrower taking out their own new loan

Hard money lenders usually make lending decisions more quickly than a conventional bank, have less stringent loan guidelines, advertise their services freely, and really do understand the world of real estate investing. But those advantages come with heftier costs than most other types of lenders charge. Points or fees paid up-front are much higher than what banks charge (so you need more cash), the interest rate is also higher, and most hard money loans are very short-term—typically 4-12 months. Investors MUST have an exit strategy when using hard money to buy a property. Hard money can work especially well for quick flips, but you'll need to know in advance that you can refinance your deal with a conventional lender once the hard money loan term is up.

The earliest mortgage lenders of the 19th century were focused entirely on collateral and although they weren't known by today's terminology, they were essentially hard money lenders. There was no way to document anyone's income in those days, and credit reporting had not yet emerged. If the borrower defaulted, the hard money guys got the property. Deals like that were done quickly and required a lot less paperwork. Hard money lenders knew their risk was minimized by the ability to obtain the property if the borrower defaulted.

Hard money lenders have changed over the years. Today, they are definitely concerned if the borrower is creditworthy and will verify their employment status, income, and assets. Sometimes they required almost as much documentation as traditional banks, but for all the extra time and trouble, investors hear "yes" to their deals a lot more often.

Hard money lenders aren't loan sharks who break borrowers' kneecaps when they can't repay. At the same time, these lenders aren't your Granny either. They charge interest rates and fees that can make you cringe and often base lending decisions on whether there will be enough equity in their subject homes that they can foreclose and still turn a profit. But private money fills a niche in mortgage lending, helping investors who have specialized needs or too many credit problems to get conventional financing. But if your deal still works, even with paying extra fees and higher interest, that's all that really matters.

Simply defined, a 1031 Exchange is a tax deferred exchange that allows for the disposal of an asset and the acquisition of another similar asset without generating a tax liability from the sale of the first asset. This can include the exchange of one business for another or one real estate investment property for another property. In a typical real estate transaction, the seller is taxed on any gain realized from the sale of a property. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date, making a 1031 Exchange an effective tax deferral strategy for investors. This code allows for a rollover of equity of like income real estate, through a 1031 Exchange, to take place without requiring the payment of capital gains taxes on the initial investment. The reason this is allowed by the IRS is because a real estate investor who has reinvested the sale proceeds into another form of real estate, has truly not realized an economic gain and should not pay tax. In other words, the taxpayer’s investment is still the same, only the form has changed (e.g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the investor to pay tax on a paper-only gain. There are limitations on the amount of capital gain that can be tax deferred, so ensure that you check the latest tax rules before proceeding with a like-kind exchange.

Properties are of like-kind if they are of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties. For more information directly from the IRS visit http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html

improvements to real estate investments. The only “catch” is that any income or loss becomes the property of the IRA and as such will be off limits to you personally until you retire—unless you are willing to incur a hefty penalty for early withdrawal.

It’s long been a misconception that the only investments allowed in a retirement account are stocks, CDs, and mutual funds. The truth is that broader investment options have been available to the public since 1975, the year contributions could first be made to IRAs. Why didn’t anyone know? A few knew, but because the retirement industry has been dominated by large transaction-driven custodians with a narrow focus on traditional investments, self-directed IRAs just weren’t common. While these traditional kinds of accounts are just fine (or had been until the last 18 months or so!) they don’t offer the kind of freedom that a self-directed qualified retirement plan offers. Now that investors are looking for more creative mortgage financing options, they’re becoming more aware of the ability to purchase real estate in IRAs, and soon enough the public will hear more and more about these benefits, too.

With a self-directed IRA, you are always exclusively in charge. You find appropriate and attractive investments on your own initiative. But you still need a custodian to hold the IRA on your behalf, just like with a traditional IRA. These firms specialize in the record keeping and administration necessary for self-directed IRAs. Not a lot of third parties (yet!) offer this service, but whomever you choose should show you how to purchase rather than what to purchase. For the most unbiased assistance, consider a custodial firm that doesn’t sell investment products—a company that is completely neutral.

Even for non real estate investors, it just makes sense to gain more control over your own retirement funds, or at least part of it. The first step is to get educated and do your research.