Find Your Perfect Match: The Best Investment Property Loans for Your Texas Investment
6 minute read
April 3, 2024


Real estate investors are flocking to Texas thanks to a robust economy supported by numerous industries.

The investment opportunities are plentiful, from renovation projects to rentals and new construction.

If you’re a real estate investor interested in the Texas market, read on to explore the range of loan options available to you.

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What investors should know about the Texas real estate market

Texas has a steady demand for real estate that’s driven by job growth and population migration.

The state is home to numerous industries, including:

  • Technology
  • Healthcare
  • Energy
  • Manufacturing

The size of the state creates opportunities for everything from new construction projects to affordable rental properties and luxury homes.

Compared to other U.S. markets, Texas has more affordable real estate prices that grant entry to a range of investors.

Of course, this depends on the property location as well—major cities like Houston, Dallas, Austin, and San Antonio can satisfy more experienced investors looking for a lucrative investment.

What are your investment goals?

To get started in the Texas investment market, investors must first identify their goals.

Understanding your investment goals will guide the entire process, from choosing your property to selecting the right type of financing.

Your goals might involve:

  • Short-term flips: This strategy involves purchasing a property to fix it up and sell it for a profit
  • Long-term rentals: Investors seek out properties to rent them out for steady, ongoing income
  • New construction: Investors purchase a plot of land to build a new property from the ground up, which can then become a long-term rental property or be sold for a profit

Each investment comes with its own unique set of financial needs.

The ideal source of financing for Texas real estate investors is hard money loans.

What investment property loan options are best for Texas?

Hard money loans are primarily used in real estate investing due to the quick approval times, flexible lending criteria, and straightforward underwriting process.

These loans are offered by private lenders rather than traditional banks or financial institutions.

The benefits of hard money loans for investment property include:

  • Asset-based lending focuses on the value of the property the investor wants to purchase, rather than their creditworthiness as a borrower
  • Loan approval and funding within days or weeks
  • Flexible terms that are tailored to the investment
  • Short-term and long-term lending options

Hard money loans are not defined by the purpose of the loan (e.g., construction, purchase, renovation) but rather by the nature of the lending criteria and the loan structure.

Let’s take a look at the types of hard money loans available to Texas investors.

Fix-and-flip loans for renovation projects

Fix-and-flip loans are designed for investors who want to:

  • Purchase an undervalued property that needs significant renovations or repairs
  • Make the necessary improvements
  • Sell it for a profit within a short timeframe

The loan covers both the purchase of the property and the renovations.

Lenders generally base fix-and-flip loans on the projected after-repair value (ARV) of the property.

Loan repayment periods typically range from six to 18 months.

Cash flow-based financing

Debt service coverage ratio (DSCR) loans are a key loan type for Texas real estate investors.

These cash flow-based loans are ideal for investors who want to purchase a rental property to generate long-term, steady income.

Investors can leverage the property’s income-generating potential, which makes it easier to finance properties that can cover their costs.

DSCR loans are generally 30-year, fixed-rate loans with competitive interest rates.

Bridge loans

Bridge loans help Texas investors who need immediate financing for a new investment opportunity while they wait to secure a permanent source of funding.

The fast financing allows investors to move more quickly in competitive markets or purchase properties at auctions.

Bridge loan example scenario:

  • Investor discovers an investment opportunity
  • They apply for a bridge loan with a hard money lender
  • Lender approves the loan within three to five days
  • Investor uses the funding to purchase the property
  • Investor repays the loan within one to two years using either the profits from the sale of another investment property or another loan

Bridge loans are meant to be short-term, so investors must approach the lender with a solid exit strategy for how they will repay the loan.

Ground-up construction loans

Construction loans are for investors who want to build their next project from the ground up or renovate a mid-construction project.

They cover the costs to purchase the land and build the structure.

Upon completion, investors may choose to sell the property or use it as a long-term rental.

Hard money construction loans provide a simple, straightforward draw process that aligns with your construction milestones.

Why are hard money loans ideal for Texas investments?

In the competitive Texas real estate market, fast access to capital offers investors a significant advantage.

Additionally, many investment properties may not qualify for traditional financing.

Hard money loans provide the liquidity needed for investors to pursue a range of opportunities within the Texas market.

How to prepare for your investment property loan application

Preparation for a hard money loan looks different than that of traditional financing.

Take a look at the following four steps to prepare for your application.

1. Gather your documentation

The required documentation for private lending is less strict and extensive than traditional institutions, but private lenders still may require some of the following:

  • Recent bank statements
  • Credit history
  • Property details
  • Debt ratio

2. Understand the property’s financials

Your lender will evaluate the investment property’s potential to generate income (if it’s a rental) and its overall financial viability using the following:

  • Income statements for existing properties
  • Market analyses or projected incomes for new properties
  • Expense reports
  • Appraisals and valuations

3. Prepare a business plan

A strong business plan is especially important for renovation or construction projects.

You’ll want to detail the project scope and timeline, financial projections, and a market analysis.

4. Familiarize yourself with the loan terms and conditions

Make sure you understand the terms, rates, fees, and repayment schedules.

Ask your lender for clarification as needed.

Apply today with Park Place Finance

Ready to move forward with your next Texas investment property?

Park Place Finance is your trusted nationwide lender, offering you the speed and flexibility you need to achieve your investment goals.

Our team has the experience you need, with over $1 billion in loans funded across 17 years in business.

Get started with our quick online form, or give us a call at (866) 407-1599 to speak with an account executive now.


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