5 Tips for Financing an Investment Property

Investment Property

You have to make several considerations if you are planning on financing an investment property. In most cases, the amount of property you can purchase is determined by the amount of finance that you can borrow. Buying property is a very good way of investing and almost always guarantees positive returns. The ability to get positive returns depends on how effectively you manage your investment. Here some tips for financing an investment property.

Understand the market

Look for various properties in the area you wish to invest in. This means that you have to speak to the people living around the place. Let the real estate agents know that you are looking for similar property in the area. This is a tactic you can use to get them give you vital information about the many properties you can invest in. Acquire as much information as possible about demographics and average rents from professionals as well as the internet.

Pick on the right type of mortgage

It is useless spending so much time doing research on mortgages with the intention of only saving a little money each month. It is better to research on your local real estate market where you can make good returns. You need to structure your loans the right way and for these services you might need a financial advisor. This is because investment properties are always taxed but we have some borrowing costs which are not, so it is important to note this. You may choose a fixed rate loan or a variable rate loan depending on your circumstances. Variable loans are always less costly but deciding on fixed rate loans at the right time is advantageous.

Choose the right property

When you invest in real estate you expect your capital to grow. It is therefore of utmost importance to choose a property that increases in value and buy it at a price that is favourable to you. Real estate is usually difficult to price. It is not like the buying of shares where you know the market value. You may be forced to acquire property below its market value if you are patient enough since investing is a long term project.
You have to do a market survey before buying any property. Buying at places you are unfamiliar with is detrimental to your investment plans. Do it only in places you have researched about and you are confident that your investment will deliver good returns. Property lenders, mortgage brokers, and real estate agents always have a lot of information about properties in different locations so you may seek their help if you want to invest on those properties.

Have a good property manager

This is usually a professional real estate agent whose job is to keep things in order for you and the tenant. He/she helps you manage your tenants and get the best value for your property. He/she knows when you should review the rents. With a licensed real estate agent you will also get valuable advice on your rights and those of the tenant and property law. The maintenance issues are also taken care of by them.

Use a mortgage broker

A home loan or mortgage broker is an intermediary between the borrower and the mortgage lender or the bank. They work with the consumers to make sure that they qualify for a mortgage. Their main duty is to gather the borrower’s details (employment documentation, asset and income et.c) which are necessary for the borrower to acquire the financing. Once they have all these details they decide the type of investment and loan that best suits the borrower. This however does not mean that the broker decides everything for the borrower. His/her main duty is to help the borrower choose wisely and get a commission from it.
When all the details have been looked at, the broker then submits the loan to the lender for approval. During this transaction the broker is in contact with both the bank and the borrower to ensure the process goes on in the right way. You may be wondering how these brokers make money, we recently covered this in this blog post.

Leave a Reply

Your email address will not be published.