Annette
Bui |Updated May 29, 2020 | Mortgage Programs 101
Investment
properties are a great way to leverage assets to create wealth, whether it is a
property purchased with existing tenants that occupy the whole house or a multi-family
unit with multiple tenants. The intention is to acquire income producing
property so essentially another party is paying the mortgage for you for either
a short term or possibly long-term investment. When qualifying for this type of
loan, depending on whether there is an existing tenant or not. The income may be
used to offset your mortgage and other expenses. Unlike primary and secondary
homes, an investment property does not have restrictions such as a minimum
distance from your primary residence and does not have to be near a resort. In
some cases, such properties do not get mortgaged to generate rental income but
rather upgraded or remodeled and later sold for a profit by real estate
flipping.
Advice
for acquiring an investment home:
Acquiring
investment property requires due diligence to know the local market and understand
how likely the value is going to appreciate or retain its value. A vital part
of identifying a good investment is researching what its operating costs and
projected rental income the property can generate. Some real estate
professionals recommend at least 1% of the purchase price as the minimum
threshold on rental income to be considered. Furthermore, to account for any additional
maintenance or management costs if you rent out to tenants or cost of materials
and labor to get upgraded and flipped.
It
is essential to do the research and get informed so an educated decision can be
made for the nominal price. Before making the decision, you may want to hire a
building inspector to locate any additional issues that may arise if there are
plumbing, electrical problems to avoid any mishaps as well as continuing this on a frequent basis.
Keep
in mind, investment properties require a higher down payment of a minimum 20-25%
depending on your credit score in addition to extra cash reserves of up to two
months expenses for each property owned. Thus, if you own just your primary and
the new investment then you would need to show two months of expenses on your
primary home and an additional two months for the new property.
How
to get started?
To get started on your
investment home search, we advise reaching out to Annette’s team to get a personalized
pre-approval to help you shop with confidence. After you close, we recommendations
to conduct ongoing financial assessments to ensure your finances are in order
and well managed to meet your lifestyle needs. With Annette’s team, you will
continue to get the support and guidance how to manage your financial journey.
The value system Annette employs is to endorse a perpetual program and
relationship to continue a long-term relationship. To be readily available if
your financial goals change as your family grows and adjust a road map
accordingly to meet your custom-tailored needs.
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