With so many options, financing investment properties doesn’t have to be difficult, especially if you are purchasing a single family home. Whether you are hoping to rent out the home or resell it for capital gains, the single family home is the easiest type of investment property to get financing for.
When financing investment properties, decide which type of loan you would like and how much financing that you’ll need. Of the loan types, fixed rate loans and adjustable rate mortgages are the two most common. Fixed rate loans are good if you plan on keeping the house to use as a rental property while adjustable rate mortgages are good if you plan on reselling the home before the rates would be adjusted.
For single property homes, 100% financing is possible. Even if you have the money for a down payment, you might not want to spend it. Instead, you might use that money to repair and renovate a home that you will be flipping. Financing investment properties 100% isn’t available to everyone and isn’t always the smartest decision, so run the numbers of several lenders that you trust.
Take advantage of the competitiveness between lenders to get the best rates. You’ll need a good credit score and proof that your income is sufficient to repay your loan. If you don’t know what your credit score is, find out before you apply for any loans for financing investment properties. Try to correct any mistakes that you find and remember that opening or closing new accounts might make your credit score drop.
Not all investors can qualify for loans for financing investment properties. If you can’t obtain a loan because you have insufficient credit history or can’t prove your income, consider working with a partner. Your partner will provide the funds to acquire the property while you will do the necessary work to keep it well-maintained and profitable. In a good partnership, you’ll both benefit.
Private loans are sometimes available for financing investment properties. These are more risky as they typically have high interest rates, but if you know you’ll be able to quickly resell the property for a profit, these kind of loans might be worth it.
Financing investment properties can be difficult, but with so many options available you should be able to find the right one for you. It’s always wise to seek the advice of qualified professionals who are experienced in investment properties such as an accountant or attorney, as well as property appraisers who are familiar with the area.