Apart Loan & Proper Loan
To use a loan for Real Estate Investment, an apart loan or a proper loan is your choice.
Here are the characteristics of each loan.
Apartment loan is a package loan made by financial institutions.
Therefore loan length, interest rate, maximum loan amount are all set already.
Based on the value of a property, age, earning rate and status of applicant (annual income, asset, work place, length of service etc), banks evaluate and screen. Even one of these factors doesn’t meet their requirement, you don’t get the loan but that means if you can meet ALL of their requirements, you are able to pass their screening. It’s useful for a business person.
Proper loan is a flexible loan for a business.
Banks give you a loan for your rental business. Interest rate or loan period is not fixed and loan condition will be determined by your financial status, past transactions, and other competitors.
There is no checklist like an apart loan for screening but they will look overall situation to decide whether they give a loan or not. It’s a custom made loan.
This may be for an owner of a company or board of directors.
When you try to purchase an investment real estate, you should go for an apartment loan first.
It is a “packaged loan” like a home loan or car loan that has specific screening requirements so that anyone who meet these requirements can easily get a loan.
Therefore understanding these apartment loan requirements thoroughly and living up to them would be the most effective way. Don’t bring the property you think is good but bring the one that the bank gives you a loan for.
On the other hand a proper loan is an individual business type of loan. There is no packaged proper loan so a bank screen individually. Also interest rate is not a set one and it’s decided based on your financial status and past financial transactions.
If you are thinking to increase your real estate portfolio, having just an apart loan is not enough. At some point, you need to move on to the proper loan level. It’s easier to start with the apart loan as the first step and then apply for the proper loan with some good rental business running history.