Investment Property

Investment Properties

To lenders, real estate that isn’t a homeowner’s primary or secondary residence is considered an investment property. Financing these properties can be a challenging endeavor, but also an extremely rewarding one.

 

The are many incentives to buying an investment property. Oftentimes, a buyer purchases the property with the intent to generate a future profit through rental or sale of the home. They may also invest in order to reap tax benefits or develop their investment portfolio.

 

Regardless of your reason for acquiring an investment property, the process requires thoughtful preparation and a strong awareness of your goals and financing options. Guidelines and regulations surrounding investment property loans differ from primary home mortgages in that they are generally stricter. This is because investments inherently carry more risk than a traditional home purchase.

 

An experienced lender like Global Equity Finance can work with you to understand your investment property goals and then select an ideal financing option based on your specific desires and needs.

Benefits of an Investment Property

annual

Increased income

With the potential to turn your investment into a rental property or future sale, the home can provide you with significant cash flow.

loan-terms

Tax benefits

As the owner of an investment property, you may be eligible for tax benefits such as deductions for mortgage interest, property and real estate taxes. Consulting a tax advisor can help you identify which benefits you qualify for.

home-equity

Investment portfolio growth

You can build and diversify your investment portfolio through ownership of an investment property.

Things to Consider When Financing an Investment Property

  • Qualifying for an investment property loan is different than qualifying for a primary or secondary home mortgage. For many borrowers, more stringent guidelines for eligibility make this process more difficult.
  • As investment properties come with more risk and a lack of insurance options, a higher credit score, additional documentation of income and assets as well as a larger down payment(around 20%) are necessary. Prior experience with property management is also required by many lenders.
  • Other things to keep in mind include:
    • Additional expenses: Higher interest rates, bigger down payments and other loan process costs can make financing an investment property rather expensive. It’s also important to be mindful of other expenses you may incur such as homeowners’ association dues, cleaning fees, utility costs and more.
    • Type of home: Not all investment properties are eligible for financing. Mortgages for manufactured homes, time-shares, co-ops and bed and breakfasts range from rare to nonexistent.
    • Home equity line of credit (HELOC): It’s possible to take out a line of credit on your current home and use the equity to finance your investment property. When using a HELOC, the homeowner’s current residence becomes a security for their new property, so it’s important to consult with a mortgage advisor who can explain and guide you through the process.
  • Call us today at 800-245-3279 for help with financing your investment property!

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