Financing Investment Properties – Part 1

Financing Investment Properties – Part 1

The prices of homes have been steadily increasing since they plunged to immense depths during the housing crash. As a result, many have been curious as to whether or not it is now considered to be an optimal time to make a solid investment into the residential-based real estate market.

According to information derived from the National Association of Realtors, approximately 85% of all major metro-based regions saw high gains in single-family homes in the first quarter of 2015.

This continues to climb in 2016. Best of all, interest rates are at an all-time low; however, it is not as easy to obtain financing for real estate purchases – especially those purchases that are focused on investment properties. If you have an interest in financing investment properties, it is imperative that you read all of the information that will be contained in this two-part guide.

A Comprehensive Guide for Individuals Interested in Financing Investment Properties – Part 1

The Benefits
If you have an interest in obtaining an investment property loan from a bank, it is quite likely that you have already become familiar with the rewards you may reap from the endeavor. If not, the following outlines the highest-rated benefits, according to those that specialize in real estate:

  • When you elect to finance an investment property, you have the potential to earn money from the rental opportunities that these types of properties produce. This is especially true if you invest in a property that is in close proximity to local businesses, popular commuting areas, and/or popular vacation destinations. The more attractive the property is to potential tenants, the more money you have the potential to make.
  • When you purchase an investment property, you are likely to incur a few expenses; however, the ongoing income that you receive from such a property may aid in offsetting those expenses.
  • There are numerous tax benefits that you may potentially qualify for with your investment property. Mortgages, payments on the home’s equity interest, and even property taxes may offer many tax advantages. In order to experience the full scope of potential tax benefits, you should consult a licensed tax and/or financial advisor.

Your Financial Responsibilities
If you are considering financing an investment property, it is important to become familiar with the additional financial-based responsibilities that you may incur. The following outlines the most common, according to professionals in the real estate industry:

  • The loans that are available for investment properties often have interest rates that are significantly higher than those for regular properties. Additionally, these loans most often require a larger amount of money for the down payment and different approval requirements are attached to the loans.
  • When you have an investment property, you may have other types of expenses. Examples include dues from a homeowner’s association, special insurance coverage, and even landscaping and/or cleaning services.
  • If you have an investment property and your tenants vacate the property, you will need to have an income that will be able to allow you to manage the mortgage and other property expenses.
  • Investment properties have ongoing maintenance, upkeep, and utility expenses. You must be able to afford these, on top of your own expenses.

We encourage you to return next week for the concluding installment to this series.

In the meantime, if you have any questions about the loans that Somerville National Bank has available for investment properties, you may contact us at one of our 6 locations.

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