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Jump-start Your Real Estate Investing Business, Loan Investment Property Without Down Payment

You can say that you actually have a foot in the property investing door once you have acquired your first investment property already. However, as an investor you may already have gotten acquainted with the different stumbling blocks when you loan investment property that you did not encounter when getting a traditional mortgage for your personal home. Often, you would be required to show that you can afford to pay both your home mortgage and that of your investment property by demonstrating that you earn sufficient income, much much more than what ordinary homebuyers earn. Lenders see investment property loans to involve higher risks than traditional mortgages so they tend to charge higher interest rates and usually require more down payment which could range between 25 and 35 percent. This means that you need to do some serious saving before you can start investing in a property. No savings, no foot in the door, right? Well, not all the time. What if you can actually loan investment property with no money down.

You Can Loan Investment Property With No Money Down!

Yes, you can possibly borrow as much as 95 percent of the value of the investment property as long as you qualify. This means that all you need to shoulder are the costs of documentary stamp taxes, legal fees, and Lenders Mortgage Insurance (LMI). But just how do you loan investment property at 100%?

Well, there are lenders who offer 100% financing, and even absorb the risk by not charging LMI. Some call this a quick start loan. However, to compensate for the higher risk, you have to pay a higher interest rate. This steep rate though, will fall a few years after. This means that in the long run, this type of loan is not actually more expensive than a loan charging LMI.

Now you may be asking why do you have to put up with a high interest rate if you can actually afford the down payment and LMI? Here’s why:

Why Loan Investment Property Without Down Payment?

1. Smaller deposit required.

Because you do not have to pay the premium for LMI when you settle, all you need to prepare is a smaller deposit, which you can save up for much faster and more easily. No need to do so much cost cutting in your personal expenses. Additionally, you can use your extra funds to rehab your property, invest in another business, or buy a personal need.

2. Use funds to acquire more properties.

Even if you can afford to loan investment property with LMI and down payment but still go for the quick start loan, you can use your extra funds to acquire additional properties and dramatically increase your capital gains.

3. Negative gearing advantage.

If income is flowing in positively, that’s good news. However, many people would cringe at the thought of how big a chunk of their income would go to income tax. If you loan investment property at 100 percent of the value of the property, you can purchase a property with the maximum leverage there could be and instantly cut back on your tax bill.

4. Refrain from using your equity.

As your property portfolio grows, it can become a complicated matrix of loans and properties if you keep on taking on loans and second mortgages and keep using your properties as collateral for one loan to another. You can avoid this if you loan investment property with no money down. You do not have to put your personal home on the line by using it to securitize your investment loans.

To sum up, you do not have to shell out your personal funds to loan investment property as there are loans that require minimal or zero down payment. This type of loan is very helpful for beginners in real estate investing to get their foot in the door and for veteran investors to continue acquiring more properties even when cash is limited.

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The Allure of Getting An Investment Loan, Property

The glut of real estate available, thanks to the avalanche of foreclosures, short sales, REOs and hard-pressed homeowners, have significantly pushed prices of investment properties further down. This is making a lot of real estate investors salivate as experts declare that now is the right time to invest in real estate. You may be among the scores of first-time investors raring to invest in real estate and become a landlord, intending to use rental income to cover for the costs of acquiring and maintaining a property, and hope to have the property’s value go up in the years to come. But is it really a great time to obtain an investment loan and property to rent out? If you are determined to do so, make sure to bulk up your landlord muscle to help you tackle the following hurdles.

The Snags of Obtaining Investment Loan, Property to Become a Landlord in 2011

1. Rising Vacancy Rates

Because of the boatload of people losing their homes and those who cannot afford to buy a home, you may expect more people to be seeking out homes for rent. Think again! Across the country, landlords are hounded by vacancies. This has prodded them to come up with incentives – usually a discount such as a 3-bedroom apartment for the price of a 2-bedroom unit, cheaper security deposit, a month of free rent, just so tenants would sign the lease contract.

The foremost reason why landlords lose tenants in the years between 2002 and 2006 was because these tenants were purchasing their own homes. Fast-forward 2011, the primary reason for losing tenants is defaults leading to skips and evictions. As a result, vacancy rates have shot up egging landlords to compromise, including their criteria for tenants.

2. Lenient Tenant Application Criteria

Owing to the discouraging occupancy rates, landlords are now willing to take in tenants whose qualifications would normally not pass the standards of years ago. Landlords used to turn down would-be tenants who have gone through a bankruptcy, foreclosure, or previous evictions. But now, with so many people having gone through such economic difficulties, they have become a whole new market segment in the rental industry. If you are planning to take in these people, make sure that you require them to at least have a job and bear a decent credit rating. Some landlords are ready to look past the credit score and some even consider prospective tenants who are jobless, but enjoy unemployment benefits.

3. Longer and More Challenging Evictions

The mounting number of foreclosures on rental properties and the increasing number of people losing their jobs have significantly contributed to the increase in the incidence of evictions, leaving the courts and the local law enforcement with a mountain of legal paperwork and evictions to carry out on their respective plates. As a result, evictions are taking longer than before, not to mention that there are a number of sheriffs departments that decline to serve eviction notices.

4. “No Pets Policy” Are Out

Would you rather take in a jobless tenant with no pet or a tenant with a good job and rental history with one or two pets living with him? Most landlords, nowadays, are willing to take in the latter. Besides, this type of tenants are inclined to pay additional fees just to have their pets live with them. They have become another segment in the market and some property managers have already taken action in luring this niche by providing areas for walking dogs and scoopers and bags for tenants to clean up after their pets. However, a wise landlord knows that he is boosting occupancy rates at the expense of the risk of flea infestations, noise and disturbance, and damage due to untoward toileting incidents.

These are some of the setbacks of taking the landlord role these days. It is up to you to weigh these against the benefits of generating rental income and possible property appreciation down the road.

While many are saying that now is the best time to obtain an investment loan and property, you have to acknowledge that there are also new challenges that a landlord could be facing due to the current conditions in the real estate market.

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Security and certainty versus low initial cost. These are what’s at stake when investors and homebuyers decide between taking on a fixed or adjustable rate mortgage loans for investment property. If you go for low initial cost, you have to be willing to take the risk of uncertainty. On the other hand, if you would rather put security and certainty first, you have to be willing to pay its price, in the form of expensive interest rates and payments. Let us put their pros and cons on the scale and see what holds more weight for you.

Advantages of Adjustable Rate Mortgage Loans for Investment Property

• Interest rates and payments are initially lower.
• It is a great choice in an economy where interest rates are on a decline.
• At the outset while the interest rate is low, you can save more money and invest it in another property or investment vehicle with higher yield.
• If you plan to sell the property before long, say flip it, the ARM is a great option due to its low initial rate.
• When interest rates fall, you do not have to spend on a new set of closing costs and fees as you do not have to refinance since your rate and payments will go down with the going rate.
• Because the the initial payment is low you can afford to purchase properties that are bigger than what you ordinarily can.

Disadvantages of Adjustable Mortgage Loans for Investment Property

• There is the big possibility that interest rates and payments can skyrocket over the loan period. For instance, if rates escalate, a 6 percent ARM can jump to 11 percent in a matter of three years!
• Although your contract may include an annual cap, let’s say 2 percent, to hold the possible mortgage rate increase in check, and a lifetime cap, of say 6 percent, in theory you could be facing a steep rate increase from 6 to 12 percent in 12 months after closing if the rates in the general economy take a leap. Annual caps often also do not cover the first adjustment.
• The flexibility of ARMs involve adjustments in margins, caps and indexes that can sound Greek to ordinary homebuyers and newbie property investors, hence, they can easily get stumped and possibly fall victim to unscrupulous lenders.
• Stay away from negative amortization loans, a type of ARM, as you may find yourself owing more money than you did at closing. Some lenders set payments so low so that borrowers can afford the loan. However, the payments could be set ridiculously low that they cannot cover the entire interest due. This adds to the amount due and gets rolled into the principal balance.

Benefits of Fixed-Rate Mortgage Loans for Investment Property

• You can sleep soundly because rates and payments do not fluctuate with rates in the overall economy. So even if inflation soars beyond control and mortgage rates spiral to 20 percent, you would be thankful you have a fixed rate mortgage loan for investment property.
• Because you know how much you need to pay each month, budgeting becomes a breeze.
• Unlike the ARM, fixed rate mortgage loans for investment property is easy to understand for beginners in real estate investing.

Drawbacks of Fixed-Rate Mortgage Loans for Investment Property

• When the rates in the economy are high, fixed-rate mortgage loans for investment property can be very expensive especially since an early-on payment and rate break are not available.
• When rates fall, you need to refinance to take advantage of the cheap rates. This will cost you a few grand to cover for closing costs and will demand processing time visiting the title company’s office and looking for bank statements, tax forms and other documents.
• Typically, fixed mortgage loans for investment property are generic because majority of financial companies sell their fixed-rate loans to the secondary market. In contrast, ARMs can be tailored more easily to meet your specific requirements.

Consider the respective pros and cons of the two types of mortgage loans for investment property to decide on which suits you best.

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Can You Handle the Volatility that Comes With Variable Loan for Investment Property?

Choosing a type of loan for investment property is not as simple as a random coin toss. You need to do some serious evaluation as to which type suits you best. At first glance, a variable loan for investment property will sound enticing to newbie real estate investors because of its low initial cost. You have to take note though that the operative word here is “initial”, which means that over the period of the loan, this could still rise depending on economic rates and indexes. But this does not necessarily mean that it cannot work for you. There are situations where the uncertainty that shadows the adjustable loan for investment property may be worth taking the risk. Let’s see what these are:

Adjustable Loan for Investment Property is Right For You If…

…you plan to sell the property in the near future.

A number of property investors buy property, rent it out for rental income and hold on to it until they decide to sell it for capital gains. Other investors, or the same investors, could acquire a property, rehab and resell it for profit a few months or a year after it was bought. The variable loan for investment property is more suited to the second scenario since you can take advantage of the lower initial rate and payment. With the very affordable payment, you can save up some more money to use to buy another property or invest in a higher-yielding investment vehicle. Additionally, your plan to sell the property in the near future cushions you from the risk of great rate fluctuations because, most likely, you no longer own the property when the adjustable rate period starts.

…if the rate adjustments are not so frequent.

Just how frequent is frequent? A yearly adjustment in your mortgage is acceptable, and most variable loans for investment property adjust on the anniversary of the mortgage. To be exact, the adjusted rate is settled on approximately 45 days prior to the anniversary depending on the specified index. Stay away from adjustable mortgage loans that change monthly if you think you cannot handle this too much lack of predictability.

…when interest rates in the overall economy are high.

To avoid the high interest rates in the overall economic landscape, you can take advantage of the initial low rate of a variable loan for investment property. When rates start to fall, you may be able to enjoy even lower payments without the need to refinance. However, when the interest rates are low at the time you are looking for a loan for investment property, opt for the fixed-rate loan to lock in the cheap rate for 30 or so years.

…if you still can afford the monthly payments even if interest rate increases significantly

Yes, at the onset, you may feel happy with the initial rate for your adjustable loan for investment property. However, a year after, it is possible for your rate to double. Can you handle this? For example, although you may enjoy the initial mortgage rate of 5.75 percent if you take on a $150,000 variable loan for investment property that adjusts every year with 2/6 caps, a few years after, you could be lugging a whopping 11.75 percent and a more expensive monthly payment. So better anticipate this and determine if your finances can afford the possible increase.

The uncertainty that comes with an adjustable mortgage loan is what keeps most property investors and homebuyers away from such kind of loan. However, if you can handle its volatility and know the best time to choose a variable loan for investment property, then you can capitalize on this flexible type of loan.

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Investors Go on a Real Estate Shopping Spree Using Loans for Investment Properties

With so many people losing their homes to foreclosure, rental properties have regained its popularity. Investors who are quick on the uptake are happy to go on a shopping spree of rental properties at rock-bottom prices in places that have endured the brunt of the economic crash, such as Las Vegas and Sacramento. Who would not be attracted to investment properties that are 15 to 40 percent less than their value one to three years ago? If you have the funding to back your investment or extra funds to cover for the down payment, why not? If none, why not consider home equity loans for investment properties?

Get Loans for Investment Properties : But First, Show Me the Money!

Mortgage lenders find funding traditional home loans to be risky and view financing investment property to be fraught with more danger. For this reason, loans for investment properties are often more expensive in compliance with the “risk-adjusted pricing” of Fannie Mae and Freddie Mac. If you have not saved up to pay a hefty down payment, such changes may render the loan beyond your means.

Mortgage Insurers Won’t Underwrite Rental Properties

One important requirement to obtain loans for investment properties is to secure a mortgage insurance. Many investors find themselves in a stalemate because even if they make the grade under Fannie and Freddie’s yardstick, they could not secure a mortgage insurance because a significant number of mortgage insurers no longer cover rental properties. So how can you wriggle out of this dilemma? Turn to home equity loans for investment properties.

Tapping the Value of Your Home to Get Loans For Investment Properties

An acceptable credit score and sufficient equity in your primary residence may be your key to opening the door to a new giveaway investment property by using them to tap a home equity loan. With these components you can get financial backing to pay the down or to fund the total purchase. If you’re lucky, you can find lenders offering home equity loans for investment properties without charging lender fees and points. Your lucky stars are really what they are if your primary home is not located in a distressed area, unlike the investment property you are buying, because obtaining the mortgage is made even easier.

Warning: Home Equity Loans for Investment Properties Can Leave You Homeless

Before jumping the gun, you first have to realize the risk involved in this kind of financing. Are you willing to risk your home to get a loan for investment properties? Well, you have decided to be an investor, right? And investors take risks, calculated risks. To become a better investor, you must learn how to calculate and mitigate risks and be able to distinguish which ones are worth taking and which ones are to be avoided. In the case of taking out home equity loans for investment properties, you can set contingency measures to cushion you from the risk of losing your residence. Here are some of these measures worth doing:

Ensure that you can easily pay for monthly mortgage.

The fundamentals of investing in a rental property may sound simple: get a loan to buy the property, rent it out and let rental income take care of the mortgage. However, the various expenses involved in running a rental property make a landlord’s life not that simple. Besides mortgage payments, you have to realize that you have to pay for taxes, maintenance, liability insurance, homeowner’s insurance, etc. Be scrupulous in computing for all of your expenses vis-a-vis the rental income. See to it that with all the expenses involved in running a rental property, you can still easily pay the monthly mortgage.

Cushion property investment from potential vacancies.

When I say compute ALL expenses involved in running your rental property, I mean ALL and this includes expenses that may not have been incurred yet and are unpredictable, such as potential vacancies. Despite the many people who have lost their homes and need a place to rent, vacancies do occur and could potentially dent your net income. You may want to hew to the 25 percent vacancy factor of most underwriters when you compute for your net rental income.

Set an emergency fund.

Set aside extra funds to cover for a few months of mortgage payments as fallback in case of an emergency, such as when your tenants miss their rental payments.

With proper planning, home equity loans for investment properties may be the answer to investors who need to act swiftly on a property investment opportunity.

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Home Equity Loan Investment Property Purchase

With the housing market hitting the skids and houses selling at downmarket prices, you may be considering the idea of buying your very first investment property. But the question is where will you get the money to fund the investment? There are a lot of ways to get such funding: from a wealthy relative, private investors, hard money lenders, from banks and other traditional mortgagees and several others. These financiers provide various types of loans but if you are looking for one with a relatively cheap rate and you own another property such as your primary residence, then you may want to take a look at home equity loan for investment property.

What You Should Know About Home Equity Loan for Investment Property

Home equity loan or HEL is a kind of loan where you use the equity in your home as collateral. Its loan period is usually shorter, typically 10 years, as compared to other traditional mortgages. which can take 30 years. Most homeowners use home equity loans to to back big-ticket expenses like home renovations, college tuition or medical bills. However, you can also take out a home equity loan to buy or renovate investment property. You must be aware, however, that this type of loan creates a lien against your home, and reduces actual home equity. Also, a home equity loan only comes with an adjustable interest rate rather than a fixed rate. Such variable rate does not provide stability as it can go up and down with the interest rates in the general economy. In the current economy’s state, this could mean that your interest rate can drop once the economic landscape brightens. Also be informed that lenders will typically fund only 60 to 70 percent equity of the appraised value of the property. To illustrate, a lender will not lend more than $14,000 as home equity loan to a borrower with a house that has an appraisal value of $100,000 and with an equity of $20,000. Nonetheless, a home equity loan appeals to many borrowers because the interest on the loan can be considered as tax deductible as a business expense.

Home Equity Loan, Investment Property and Your Personal Home

One important thing you must bear in mind about taking a home equity loan is that you can possibly lose your very home if you default on payments. If the investment property you acquired is, after all, a bad investment, then you could lose home sweet home. So make sure that you have done your due diligence about the rental property or upper-fixer that you are considering to buy before putting your own home on the line.

Another relevant detail you should keep in mind is that the current housing market value dictates the actual amount of equity in your home. With prices of home plummeting, the actual equity in your home may have also dropped. But if your home is in a local housing market that is doing fine, then you are in luck.

Home Equity Loan Investment Property Renovation

If you already own an investment property and you want to bring it up to code, a home equity loan can also be used to fund this project. However, in the current economic and housing market condition, renovating a property for reselling may not be such a good idea. While rehabs can increase the value of a property when times are good so that you can resell the property for a profit, this may just not be the case during these times. It is also wise to renovate a rental property when the economy is doing well since your rental property will compete with your tenant’s idea of owning their own homes. However, if you see to it that your property is well maintained with repairs always taken care of, this will encourage tenants to stay long-term. It is also the ideal thing to do when the economy is booming because tenants can afford higher rents so that you can recoup your repair expenses.

Home equity loan for investment property can be a newbie investor’s way of acquiring new property or an old-timer to renovate an existing rental property.

Taking out a loan for your investment property is like eating in a buffet. An assortment of loan features and options are spread before you by lenders. You have to decide which of these features you want on your plate. Just make sure though that you only take that which you can chew. Otherwise you may have to spit it out in embarrassment leaving a bad taste in your mouth. So before you take your pick, here are some of these loan options spelled out for you to mentally digest:

1. Negative Gearing Loans for Investment Property

The term gearing depicts a picture of the cost of owning an investment property through a loan vis-a-vis your rental income. Your investment loan could be positive or negative gearing. It is positive gearing when your rental income is greater than the bank interest and fees, property and maintenance cost and other expenses associated with owning the property. You can say that your loan for investment property is negative gearing when the rental income it generates is not sufficient to cover for the costs of owning it.

This is actually not a loan feature that your lender will explicitly offer you, but negative gearing, albeit negative-sounding, can be used as a strategy to save on taxes. This is because it is possible to use the deficit as tax deduction against the income from that property and other investments. However, unlike in some countries like Australia, you cannot claim the losses against wages or salary income if you are an investor in the United States as this is considered illegal. To better understand this, talk to a tax consultant.

2. Loans for Investment Property With Interest-Only Repayments

If you want to take out a loan for investment property and currently need extra funds for another investment or expense, a loan with interest only repayments may suit you well. With this type of loans for investment property, all you have to pay for within a given period (usually 5 years, sometimes 10 years) is the interest, while the loan principal would not be pared down. The interest is the only portion that can be applied for a tax deduction. If you can negotiate a longer interest only period, you can enjoy a longer period of tax deduction for the whole repayment. Again, seek the advice of a tax consult if you plan to take out this kind of loan for investment property.

A similar form of loan you can tap for your investment property is the evergreen line of credit home loans. Repayment of principal is not required within a given period as long as you do not exceed credit limit. This leaves the principal outstanding for the long term.

3. Loans for Investment Property With Interest-Only-In-Advance Option

This option is applicable for fixed rate loans for investment property wherein you can repay for as much as 12 months’ worth of interest ahead of time and for this you can enjoy a discount which is deducted from your fixed interest rate. You also have the option of combining interest repayments into one lump sum and for this you can tap possible tax cuts. For further insight, consult a tax expert.

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Loans, Investment Property and Varying Borrowing Assessments

Choosing your loan options does not end at choosing certain loan features. You also have to choose well the particular lender to transact with as different lenders offer different terms. Look for lenders who will count in your potential rental income and negative bearing benefits when evaluating the amount you can afford to borrow. So shop around to get the best possible deal.

Not so long ago, real estate investors were paying higher interest rates than homebuyers who would be occupying the property. But these days, loans for investment property now share the same rate as those for homebuyers. This means that your choices of properties are now wide-ranging and could include basic home loans with restricted options, loans with introductory rates, and the like. Know your options to get the better deal.

Understanding Commercial Investment Property Loans to Get Approved

You may be one of the many investors who are attracted to commercial investment properties because of their monthly earning potential, not to mention the serious prospect of capital gains over the long haul. If you are thinking about venturing into this kind of real estate investment, you would definitely need a commercial mortgage. Before taking any form of funding though, you have to have a good grasp of what it is to better your chances of getting approved. You must realize that it is not enough that you are a strong borrower. What better way to understand commercial investment property loans than to compare them versus the more common residential property loans?

The Differences Between Residential and Commercial Investment Property Loans

Whose Money Are You Borrowing?

Commercial investment property lenders lend their own money, whereas residential lenders or some residential financial institution do not really lend their own money. They initially fund the loan, then sell the loan to Freddie Mac and Fannie Mae, hence, getting back their money relatively sooner than when they finance commercial investment property loans, although the residential lender will continue to have the servicing rights. Subsequently, Freddie Mac and Fannie Mae will package all these loans and hand them over through to mortgage backed securities and similar investors. This is one vital difference between the two kinds of mortgages that you must understand.

Where Do Your Payments Go?

Owing to the foremost difference we mentioned, you now can follow that when you pay for your commercial investment property loan, there are no big second-layer lenders, like Fannie Mae and Freddie Mac, expecting to reimburse the primary lender. Your payment would most likely be used by your lender to lend the money to other companies looking to invest in commercial properties. With a residential loan, Freddie and Fannie will hang around.

What If You Default?

A number of commercial investment property loans are nonrecourse. This means that if you default on payment, your lender can take hold of the collateral. This is because without the titan lenders that residential mortgages have, commercial lenders are left in the lurch with a sorely performing asset, and their only recourse is to sell the property. For nonrecourse loans, however, they do not have further claim against you for any balance. For this reason, the qualifying criteria are often stiffer as lenders are more selective in approving commercial investment property loans as they would be with residential mortgages.

So now that you already have a good grasp of the behind-the-scenes of the lending world, you now have an idea on how to get to work on your loan application. But remember, no two properties are exactly the same, so even if they are both commercial properties, do not expect them to get the same terms in their commercial investment property loans. The particular property you choose to invest in is a big factor as to whether or not your loan application gets the thumbs up or the thumbs down, so choose astutely.

Turning Down No Money Down Investment Property Loans

No money down investment property loans are a great way to obtain investment properties even if you have not saved up for a down payment yet. Real estate investment opportunities can be fleeting and need swift action or forever lose it, incurring you an opportunity loss. A zero money down mortgage allows an investor to leap on a real estate great deal when it presents itself. Even if you can afford to put down 20 percent of the loan amount, you opt not to because you want to use the money in another investment instead. Despite these perks, a no money down investment property loan also have its downside. If you can afford to make the down payment, cough up and forgo the chance to obtain a 100% mortgage loan. Here’s why:

3 Reasons for Passing up on No Money Down Investment Property Loans

1. Higher overall cost of the investment loan

No money down investment property loans involve taking out primary financing, usually 80 percent of the amount and a piggyback a second mortgage, usually 20 percent, to cover for the down payment. Such a loan structure typically increases the cost of the loan due to the second mortgage. Not only that, this will also increase either the rate on the first mortgage or the total loan fees.

For example, let’s say you would like to secure an investment property loan for a $400,000 property. If you can make the 20 percent down, you can secure a $320,000 fixed rate investment property loan at 5.75 percent, ½ point and other lender fees amounting to $4770.

On the other hand, if you opt for a no money down investment property loan, you may be able to maintain your first mortgage at 5.75 percent, however, expect the rate on your mortgage to significantly increase at, say, 8.15 percent. Total points and other fees would also substantially increase to 1.5 points and $6490, respectively.

2. Higher risk

There is a high default rate among borrowers of 100 percent mortgages. This has been linked to the lack of discipline to save up for a down payment. If they do not have the discipline to save up for a down, then they are also most likely to miss on their payments. These borrowers pay for this high default rate in the form of the expensive piggyback or mortgage insurance. By taking on a no money down investment property loan even if you can afford the down payment, you would also be paying the same steep price.

3. A down payment is also an investment

Many investors say that they would rather invest their $80,000, which is supposed to cover for the down payment, in another higher-yielding investment vehicle. They fail to realize that putting in money for down payment would yield them greater returns. These returns include cheaper upfront costs, slashed interest payments down the road, and reduced loan balances by the time they would be renting out the property allowing them greater cash flow. If you quantify all these, you will realize that a down payment is worth “investing” in. Unless there is an investment vehicle that can truly bring in a very high yield.

Investors who can afford to make a down payment should shun no money down investment property loans to avoid the steep price that are originally set for people who are more likely to default.

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Lenders make it a point to offer spanking investment property loans like shiny brand new cars. They polish rates and loan terms just like car dealers rub down car hoods to make their offerings attractive to would-be buyers. The time you obtained your investment property mortgage, market conditions may have worked to your advantage with the terms that you got. However, as time went by and the landscape of the real estate market shifted, the loan terms may no longer be working in your favor. Let us take a peek at the signs that it may be time to take action and begin keeping your eyes peeled for investment property refinance loans.

1. Start looking for investment property refinance loans when rates are going down

You may have been lured to purchase your investment property due to its very attractive rate. However, as market conditions shifted, the low initial rate that you were once enjoying may have become a burden to you. Investors with adjustable rate loans may be lugging higher interest rates as general interest rates rise. Good thing for them though since now is the season for falling interest rates. But if you have fixed interest rate loans, the drop in interest rates may be tempting for you to consider other investment property refinance loans with lower rates. By refinancing, you can find ways to leverage the equity in your investment property, reduce monthly payments and boost cash flow.

2. Start looking for investment property refinance loans when you need to boost cash flow

Savvy investors know that cash flow is the lifeblood of their rental property business. A re-fi can inject more cash flow into your business provided that you have accumulated substantial equity (between 20 to 50 percent) in the property. You can convert this equity into cash through a cash-out refinance loan or boost cash flow by opting for an investment property refinance loan with a more affordable rate to reduce your monthly mortgage payment.

3. Start looking for investment property refinance loans when you want to purchase another investment property

The low interest rates may also be luring investors to purchase additional rental properties. You can make use of the equity you have built on your present property to buy another investment property through a cash-out re-fi.

4. Start looking for investment property refinance loans when you need to renovate your rental property

When your rental property needs a facelift, you can tap the equity you have built up to finance the renovations. Remodelling the bathrooms, replacing the roofs, upgrading the doors, floors, kitchen appliances, repainting or re-siding the building or house, can spruce up not just your building apartment, but your finances, as well, because it enhances cash flow. Rehabilitating your property will add to its market value. This gives you the prerogative to increase monthly rental, hence, also boosting cash flow.

5. Start looking for investment property refinance loans when you need funds for other important expenses

Should you need extra funds to finance certain expenses, such as the college tuition of your kids, investing in stocks and other markets, or consolidating debt, you can take out cash by refinancing your mortgage. Just make sure though that you use the cash you get for important expenses only since you are putting your investment property on the line. Would you risk losing your rental property just to buy a new boat for recreation? Don’t do this unless you can really afford the expense.