It’s getting harder for owners to invest in improvements for their rental properties now that inflation rates are increasing.
The U.S. Department of Labor revealed that prices for all household furnishings jumped by approximately 9.3% in recent years, which is much higher than the price increase on all goods. In fact, the price of kitchen furniture rose by 19.9% over the past year, while appliances shot up by 8.5%.
These price increases can be very concerning because furniture is vital in increasing your rental properties’ value. Remodeling the kitchen is included in our list of ‘5 Ways to Increase Your Home Value This Year’ because this particular space is increasingly prone to wear and tear. Smart and energy-efficient appliances also increase the value of your home due to their convenience, however, they come with a hefty price tag.
To help you cover the costs of these investments, you can consider the following financing options for your rental property improvements:
Get a hard money loan for your rental property
Hard money loans are a popular choice for home improvements because they are backed by your property.
USNews also reports that hard money loans are frequently used for short-term construction projects, so the terms usually range from 12 months to two years. Hard money loans also usually finance up to 90% of the purchase price or 100% of the renovation costs, such as RCN Capital’s hard money loans. Meanwhile, Viso Lending’s hard money financing options include blanket loans for multiple properties and single-rental loans, making them a suitable option for those who want to expand their rental property portfolio.
Take out a personal loan for home improvement
Personal loans are usually used when people want to build credit or bankroll a major expense, such as a home improvement project.
Although there are multiple home financing options out there, Sound Dollar states that the best personal loans are ideal for people who want to improve their properties. Personal loans have the edge over other financing options with companies such as LightStream offering APRs for as low as 3.99% to homeowners with good credit. Another great personal loan option is PenFed, which grants multiple repayment options and even payment skips in case you encounter financial hardships.
Sign up for a home equity line of credit
Home equity loans are secured lines of credit that offer longer terms and longer, long amounts. As such, this type of line of credit is more suitable for those who are renovating multiple rental properties over a long period of time.
The Balance explains that home equities are secured, and the amount you borrow amounts to a certain percentage of your rental properties’ equity. Though the loan process typically takes a month or even more, these lines of credit offer a term of five up to 30 years, which is the case with US Bank’s and Discover’s home equity loans.
Consider the Federal Housing Administration’s Loans
The Federal Housing Administration offers the 203(k) loan, which is made available for real property owners who are planning to hang onto their house while having it fixed.
Unlike the other options, the insured 203(k) loans offer long repayment terms and low interest rates for renovation costs. This type of loan also combines the renovation cost and mortgage amount of your property into one, so the interest can be tax-deductible. However, keep in mind that the loan can only cover costs between $5,000 and $35,000 for a term time of six months.
Thanks to these loan options, you can consider the best financing option for your own rental property. These loan options will make it easier to repair and renovate your properties, even during times of inflation.
Contributing Author – Lisa James