In real estate investing, getting the first property is usually the most difficult. This is because the investor still does not have sufficient knowledge about the market, the process, and the documentations associated with it. It is possible that the actual investment he needs to make was more than he had anticipated. But if the right property has been bought, this investment can pay off dramatically. In some cases, real estate values double and even triple within several years. However, the real problem begins in finding investment property loans.
If you are concerned about getting investment property loans, here are some things you should check out to determine whether or not you can get approved:
Look at Your Credit Rating
If you have a less-than-stellar credit rating, you might have a hard time getting loans with low interest rates. Once you become interested in investment property loans, check your credit rating immediately. There may be some mistakes that can easily be corrected. On the other hand, if you have a good credit rating, you might want to consider getting pre-approval.
In case you are not eligible to get a loan because of certain credit problems, finding out about this early on will help greatly. That way, you can look for alternative sources of credit including getting an investor partner. You may also want to consider getting private investment property loans. However, be prepared to pay high interest rate if you decide to go this route. Depending on how much the property value can potentially appreciate and how soon you can sell it, going to a private lender may be a good idea.
Know What You’re Buying
In general, a buyer has more financing options and better terms when buying a second home. Of course, a lot depends on property’s location and what the buyer intends to do with it. But all things equal, there is less stress involved in buying a second real estate property. It is important to talk to tax advisors who can advice you about how to categorize the property. It can either be a second home or an investment property. If you are getting it as an investment, name it as such to avoid unnecessary trouble.
Know the Numbers
Real estate investors have different goals when it comes to investing. For example, some prefer to fix the property quickly and sell it at a high profit. Meanwhile, there are also others who excel in pre-construction wherein they set a contract for the property before it is built and then sell it. There are also some who get an investment property loans as a long-term financial strategy. They rent out the home and live off the payment each month while expecting the property to appreciate sometime in the future.
Whatever your goal in taking out investment property loans, it is critical to ensure that you understand the numbers. You need to make sure you can afford the down payment, cost of financing, repair expenses, and advisor fees among others. This will ensure that you will reap the benefits of the investment property loan.
