Like any major purchase, an investment property can be a nerve-racking proposition. This is especially true when you’re trying to find financing for the purchase. However, many investors have found the earnings from increased property values and rent far outweigh the risk.
If you’re interested in pursuing the benefits of an investment property, these financing tips can help you get started.
Check Your Credit Early
As soon as you even consider purchasing an investment property, check your credit score to identify any mistakes and items you might need to address. The lower your credit score, the higher the interest rate on your loan will be. This will drive up the overall cost of your loan and decrease your profits.
Decide What You Want to Buy
In many cases, a second home will offer you better financing. However, it’s best to talk with a tax advisor about whether you should buy a second home or an investment property. Which option is best will depend on how you plan to use the home. It can only be a second home if you plan to live in it for a portion of time.
Wrap Your Head Around the Numbers
Some investors want to buy a rehab property, fix it up, and sell it quickly. Some investors are interested in pre-construction, meaning they build a house with the intent to sell it. Some want to purchase a property they can rent to others. Some want to buy a vacation rental they can rent and also visit from time to time. Each type of property offers a different potential profit and each comes with different expenses.
It’s important to be very realistic about what size monthly mortgage payment you can afford, even without a buyer or tenant. You’ll also need to consider the cost of maintenance and property taxes. In many cases you’ll need to take into account water and sewage expenses.
Interested in pursuing your financing options? Give me a call today.
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