Investment property can be rewarding in more ways than one, but before you plunge in, take time to consider some valuable tips.
For starters, can you afford to make a sizeable down payment?
You will need about 20 percent down to get traditional financing. As you may know, mortgage insurance won’t cover investment property, so make your down payment count. If you can’t afford a down payment, try for a second mortgage on the property.
Check your credit score first before you buy a rental property. You may have to pay a higher interest rate if your credit score is too low. Lenders like you to have at least six months of reserves put back, personal and investment-related.
If you need additional funds to make your down payment consider a neighborhood bank instead of a large national bank. The smaller banks are usually more flexible in their terms.
Ask about owner financing. Owner financing is more acceptable than it once was because credit is tighter. Tell them you want owner financing with a certain amount of money and terms and you may come out okay.
Be creative and consider securing a down payment through a home equity line of credit, from credit cards or even via some life insurance policies. If you don’t have a history of successful real estate investments, it might be difficult. These groups like to see a certain level of credit history.
The gains in prices for existing, single-family homes increased impressively in most major metro areas of the U.S. in the 2018 third quarter. That’s encouraging if you’re considering an investment property. Remember to do your homework to know you can afford the property you want.
If you do become an investment property owner, remember there are professionals like Cousin James Management to help you with the ongoing challenges. We can take on the burden of maintenance, rental rates, tenant vetting, and more, while you enjoy the benefits of extra income.