How to Finance an Investment Property

2014/09/investment-property-300x199.jpgInvestment properties are basically bought by the buyers in order to generate investment. These aren’t the properties where they want to live. They buy them, fix them and sell them for profit or generate income via renting. Financing of an investment property in the Middle TN real estate market involves credit management, which has been especially designed for real estate investors. There are different types of investment properties in the market and you can choose one that suits you but it is important to note here that investment property will need special financing.
• Apartments and condos
• IRS and commercial properties
• Single family residence
• ‘Fixer uppers’
• HUD and foreclosures
There are different types of lending institutions out there that provides investment property loans. These types of loans are catered in a different way as compared to the owner-occupied loan. That’s why; before buying an investment property, it is better to do your research properly. You can also meet different lenders in order to find out their requirements.
Sometimes it is a better idea to go to the banks in the neighborhood as they would be able to provide you better terms and conditions.
Being an investor, it is also important to realize that the credit market is becoming tighter with their rules and regulations in the past few years. Every state has different requirements and that’s why; sometimes it becomes difficult to get loans for an investment property.
There are many lenders out there would be a bit hesitant about lending money for investment properties. It is better to start with a relatively large down payment for your first property. It is also advisable that you start your investment with a residential property as it incurs lesser risks. Usually, you will have to put 20-25% down payment during your first investment.
If you want to invest, it is also important that you have a good credit score. It will have a positive influence on your lending situation. But do not invest all your savings in the property. Make sure that you have emergency money in your account for other purposes. It is not advisable to put all your eggs in one basket.
There are different loan options available for the investors. They can either get financing through fixed-rate mortgages or adjustable rate mortgages or interest-only mortgages. They can also opt for balloon payments.
The most important step in getting financing for investment property in the Middle TN real estate market is to finding the suitable lender. Traditional or conventional lenders will charge lower interest rates but they will require you to put a good amount of down payment. On the other hand, hard money lenders or non-traditional lenders will look at your property first. If they think it’s a good investment, they can give you loan with no down payment too. But the interest rates would be pretty high. Depending upon your financial situation, you can pick the lender that suits your requirements.