An investment property can be quite exciting. For some, investment properties represent an alternative to living off of the interest generated by a hefty 401k account in retirement, while others see it as a way to pad the monthly expenses of their household, and other still see investment properties as the end to their 9 to 5 life. Today, we’ll go over how to use investment property loans to achieve any of these goals.
Milking Your Investment
Go For What You Know
When considering a future in investment property, it’s important that you start small – or at least in your realm of experience. If possible, begin your journey by purchasing and dwelling in a duplex, with your family on one half and tenants on the other. This gives you the ability to truly know your tenant property, because it will likely be a near-mirror of your own. You’ll be able to become used to the idea of fixing things, upgrades are easily multiplied by 2 in material and labor costs, and you won’t ever be too far away to handle a problem. Now, you likely won’t always want to share a roof with your tenants, but it’s a great way to start. If this isn’t in the cards for you, then try starting with a home similar in make and composition (and preferably near) your own to serve as your first rental or rental units.
Shop Around… A Lot
Unlike with your family’s home, there will be more on the line with your investment property. While this may seem obvious, remember that the idea of your rental property is to gain income over its expenses, which is difficult to do if you’re buried in property debt, bills, and operating costs, such as repairs. Later in your investment career, you may be able to afford a lemon or two, but do your absolute best to ensure that doesn’t happen on your first nest egg. You’ll want to consider the fair market value of the units in the area you’re looking in and remind yourself that you likely don’t have the funds sitting around to wait for units to rent out at top dollar, then consider what your likely startup and operating costs will be, and always ensure that the math works out beautifully in your favor before pulling the trigger.
Go With Investment Property Loans
Unlike a traditional mortgage, investment property loans were designed to account for the fact that the property is generating money for the borrower, rather than directly costing them money. This can work tremendously in your favor, as your debt-to-income ratio will be adjusted slightly higher, allowing for a more favorable interest rate and general terms of the loan. Your investment property loan should leave you plenty of room to make money over your expenses, while still maintaining your properties and growing your investment. It is important that you work with the right financial partner to achieve this goal, such as the skilled private investors at Private Lending Group. Our investment property loan program was designed to help ensure that your dream of a brighter future doesn’t stall out at the “just looking” stage, but enables you to achieve your long-term goals.
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