Photo Courtesy of Leo Reynolds via Flickr

1. Credit history

If you are in the habit of paying your mortgage and financial obligations on time, you can be sure that the loans offered to you will be of lower interest rates. Late payment on your car loan, credit card including other bills can affect your interest rates and the amount of loan that you can avail. Obviously, this will have great effect on the profitability of your investment property.

2. Time frame of the mortgages

If the type of mortgage is for a shorter period of time, it will generally have lower interest rates but you have to pay higher on the monthly basis. If your mortgage has a longer term, you will pay smaller monthly dues but, over time, these payments will amount higher than when the term ends sooner. If you don’t have the money to pay higher monthly bills, then opt for longer time frame loans but remember that you will end up paying more for this.

3. The type of mortgage

As you might have already known, there are a lot of mortgage types (conventional mortgage, VA loan, FHA loan and others) and these have different mortgage computations. Knowing the difference between the different mortgage types will give you a good view of what will offer you a better deal. Ask the advice of your banker regarding this matter.

4. The type of lender

Between different lenders, mortgage rates for investment property vary a lot and they also have different restrictions. As a rule of the thumb, conventional lenders, such as credit unions, banks and trust companies have more competitive rates compared to private lenders. Chose therefore the right type of lender for you.

Another factor affecting mortgage rates for investment property are your fixed-income investments like Treasury bonds. When the Federal Reserve purchases U.S. Treasury securities, sometimes the mortgage rates decline.

Consider these factors when shopping around for mortgage rates for investment property.

Photo Courtesy of Alan Cleaver via Flickr

Every property is a potential money maker. Let’s look at how certain residential investment properties may be worth your time and effort. First, consider how much rent you can expect from the potential property. Remember, the rent should be able to support the purchase and rehabilitation and maintenance costs of the property. A safe margin would be $200 dollars profit a month beyond the mortage payment. The structural integrity of the residential investment is also important. Make sure there are no serious structural damage to the foundation or other areas of the home, including utilities such as heating, plumbing, and electrical.

You can expect two types of revenues from residential investment properties – rental income and capital gain. Either way, both are a steady and lucrative sources of income that can prove to be rewarding in the end.

Photo Courtesy of 401k via Flickr

Aside from a host of paperwork involved, you must be prepared to answer a few important questions such as:

• Reason you are borrowing money for
• Amount of funding you need
• How good is your credit
• Financial capacity to repay the loan
• How long it would take you to repay the loan
• Any assets you can pledge as collateral
• Return on investment on the property

Investment properties will prove to be profitable as long as the financing costs are lower than the property’s value. And while obtaining mortgage for investment property may be harder these days than before, diligence, careful planning and research will surely bring you the financial rewards you hope to achieve in this business.

Photo Courtesy of TheAlieness GiselaGiardino²³ via Flickr

Getting 100 financing for investment property is not hard to understand nor do. It simply means all the funds you are using to buy your investment are from a third party. Again, this does not include borrowing from your parents or rich uncle; it means borrowing from banks, lending organizations or private companies.

It is not totally easy to get 100 financing for investment property, but it is not impossible to do. You just need to know how these companies determine whether an investor can be trusted with their money.

In the US, credit history is one important thing. This is one of the first things these institutions check to see whether you can make regular payments, not because they can see your income when they ask for your credit report, but they can see your financial attitude using this. They know that a person’s income is just one thing when it comes to knowing whether he or she can make a payment; in fact, it is just minor compared to the person’s spending and paying habits. When they see that you frequently default on your bill or credit card payments, then they might think that you won’t be making your loan payments on time. If you think you will need to get this financing in the future, you should start improving your credit score beginning now.

Another thing to remember is to prepare your proof of income. This does not mean they will ask for pay slips, instead, they will ask for rental receipts and all the information about the property you are buying since they usually consider it as collateral. They need to know whether the property you are going to purchase will generate enough income to enable you to make regular payments.

With these things in mind, you can see that this process is easier if you already own an investment property or two. Do not lose heart though as this is still possible even if you’re a first time investor as these types of companies are vying for borrower’s attention. Just make sure that months or years before you intend to obtain a 100 financing for investment property, you already focus on taking care of your credit and getting income streams to make the process easier.

Photo Courtesy of 401k via Flickr

>Fixed rate loans

With fixed-rate loans, neither the interest rate nor the monthly payments will fluctuate. Fixed-rate mortgage loans extend over either 15 to 30-year terms. Loans with 30-year terms work better for people who want smaller monthly payments and need interest deductions. The 15-year-term loans appeal to those who want a lower interest rate.

>Adjustable rate mortgages or ARMs

Interest rates for these are usually capped from exceeding certain amounts and fluctuate, depending on the current market.

>Balloon payment loans

Balloon loans are short term loans with fixed rates, with payments ballooning as it is nearing the end of the payment schedule.

>Cost of funds index

These loans are ARM-type loans except that they are not capped and can adjust every month

>Hybrid loans

As the name connotes, hybrid loans have a fixed rate for a certain number of years and then switch to ARMs.

>Interest-only loans

These are loans where borrowers pay

only the interest for a certain number of years

Most lenders will have all loan types mentioned above to finance investment property and depending on your needs, one of them will best suit you. As a general rule, choose a loan type with an interest rate that isn’t going to turn around and cut into your investment’s return.

If you are getting a mortgage for a residential property, you need to show a proof of income from a job. An investor on the other hand, needs to show the income he expects to make from the rent. If you are planning to improve the property and sell it, you will have a much harder time securing a mortgage unless you can show a good source of funds to pay the monthly payment while waiting for the sale.

Photo Courtesy of Unlisted Sightings via Flickr

There are three types of investment property mortgage and each has its own computation of interest rates. When deciding which is best for you, you have to consider your own circumstances.

1. Fixed rate mortgage

In a fixed rate mortgage, the interest rates are fixed up to the point that the mortgage is paid off. The advantage of this is that your mortgage becomes predictable through its lifetime. If you rent the property out, it will generally be profitable because rents usually rise with inflation.

2. Adjustable mortgage

With adjustable mortgage, the rates can be adjusted anytime by the lender. This is a lot riskier option and that is why it is usually offered when the rates at the time of the mortgage are a lot lower than any fixed rate.

3. Balloon mortgage

A balloon mortgage is the kind in which the monthly repayment is set as though it would last for 25 years but by the end of a shorter period, say 5 to 7 years, and the remaining balance will be fully paid at the end of the term. This is advantageous to those who will sell their property because they can always pay the remaining amount in cash.

These are the different kinds investment property mortgage rates, each with its advantages and disadvantages. If you think that your circumstances are better served by any of these, then you decide accordingly.

A residential investment property is often the type of property that every neophyte real estate investor first invests in. This is because purchasing this type of real estate is simpler and closely resembles buying your personal home, except for some differences, such as typically higher loan rates for investment properties as compared to the cheaper mortgage rates for personal homes.

Photo Courtesy of kathleenleavitt via Flickr

What is Residential Investment Property?

Residential investment properties are single family homes that are bought to be rented out for rental income and eventually for capital gains. Other investors also consider duplexes and four-plexes to be under this category because the method of how to estimate the value of such properties are similar to that of residential investment properties.

So how are residential investment properties appraised?

Most single family homes are bought to be used as a place of residence for the owner while a very small percentage of these are bought for rental. Because of this relatively small number, the value of a residential investment property is assessed also using the methods, called comparable sale methods, primarily used for assessing the value of a personal home. In these techniques, the residential investment property in question is compared to other properties within the area which have more or less similar features, such as number of bedrooms, floor and land areas, number of bathrooms, and other amenities. Cost per square foot and cost of constructions are also factored in when comparing and assessing the properties. The value of duplexes and four-plexes are also assessed using the same methods, that’s why these properties are also considered to be under this category.

To illustrate, let’s say you want to buy a 2-bedroom, 1-bath residential investment property. You want to know its market value so you compare it with another property in the neighborhood that is of similar style and size. This property was sold less than a month ago for $100,000. This means that the market value of the residential property you wish to acquire is also more or less worth $100,000. Realtors usually compare and get the average of about three or more of these similar properties within the area to determine the value of a property. Then they just make the necessary adjustments for certain differences.

How Does a Residential Property Differ From a Commercial Property

Commercial properties are real estate that generate income. These include apartment complexes of at least 12 units, retail, office, and industrial buildings. Just like residential investment properties, the owners of these properties do not live there but they rent them out to tenants for rental income.

You may ask, why is your single-family or duplex residential investment property not considered a commercial property when it also does generate monthly income? Your residential investment property does not fall under this category because the method of valuation used to assess the property. Since it is very similar to residential homes, your residential investment property is assessed using the comparables methods, the same techniques used to appraise residential homes. The value of commercial properties, on the other hand, is determined by how much income it produces, that is, income less operating expenses. So the price of the commercial real estate is worked out by the amount that the investor is willing to pay for its projected net operating income.

As you gain more name and capital, you get less intimidated by the value of commercial properties so you can grow your investment portfolio, which started with your very first residential investment property, by adding huge apartment complexes and shopping strips.

1. Have adequate down payment

Since investment properties are not covered with mortgage insurance, you need to have at least 20 percent downpayment to get a traditional financing. If you can give a 25 percent down payment, you will have a good chance of getting lower interest rates.

2. A strong borrower has greater edge

Although factors like loan-to-value ratio and the lender’s policies play a role in investment property loans, your credit scores can have a great impact to its terms. If your score is below 740, you will need to shell out some additional money for the same interest rates.

Photo Courtesy of thinkpanama via Flickr

3. Try to avoid the big banks

If for some reason your down payment is not big enough, try approaching the smaller banks around your neighborhood and avoid the larger national institutions. These smaller banks, due to the fact that they are looking for clients, will be a little bit more flexible with their financing deals compared to the huge national banks.

4. Request for owner financing

It used to be that when you ask for owner financing, sellers would usually be suspicious of potential buyers because it was easy to qualify for a loan. But because nowadays, a lot of sellers are motivated to get rid of their properties, this practice has now become more acceptable. With proper explanation, owner financing can be a viable option.

5. Be an out of the box thinker

If you are certain that the property has a good chance of profit, consider getting a down payment through credit lines from home equity, life insurance policies or even credit cards. Although these are the riskier options, with proper research you can greatly reduce the risk. Risk is always an element of investing in the first place.

 These are some of the things that you can do to obtain investment property loans to finance your real estate investments. By following these tips, obtaining an otherwise impossible financing will be a little easier.

Photo Courtesy of lumaxart via Flickr

1. Expect to be asked for estimates of the rental income that the income property (more commonly known in the mortgage industry as non-owner occupied property) is expected to generate.

2. Anticipate to pay a higher down payment, usually 10 to 30 percent, than what you have paid for your primary residence. This will vary depending on your credit rating, documentation type and how much the property is worth.

3. If you are looking for a very low initial rate or negative amortization, be ready to shell out even more cash. This is applicable for option-arms and other similar unique mortgage programs that limit financing on income properties to 80% percent or less.

4. If you are new to property investing, then this rule may not concern you, but 3 property acquisitions later, you have to be aware that lenders dislike funding an investor who has more than 10 income properties. So if you have already obtained a couple of loans from a particular bank or investor, don’t be surprised if they decline to fund your third property. This will happen if you exceed their aggregate financing limit.

5. If the income property you are looking to purchase is within a condominium complex, keep these income property mortgage rules and practices in mind:

• At least 50% of the condo units have to be occupied by owners.
• For a newly constructed condo complex, at least 50% of the units have to be sold and closed before a good number of lenders will make financing available.
• You may not be able to own more than 10 percent of the units in the complex as most lenders impose this limit. So for a 20-unit complex, you can buy just two.

Nevertheless, all these rules and limits, plus the limited government programs that support investors in the purchase of income properties, haven’t stopped real estate investors from acquiring income properties using income property mortgage.

Image by Compfight

New Year, new goals, new projects, despite tough economic times, it seems that the question, “should I buy an investment property?”, manage to cross the  minds of many. The USA, being an enormous country, generates a GDP of $14 trillion, the highest in the world, representing 23% of the world’s wealth. This huge diversity of people and geography offers a wide range of investment opportunities for millions of Americans – from duplex homes to inner city condos to vacation properties. Indeed, with so many roads to real estate wealth that presents itself, there are several things to consider before jumping into the property investment bandwagon. One thing that’s certain, though, is that you need to learn the things involved in property investment so that you can surely be confident when the ripe time to invest comes.

Should I Buy An Investment Property?  A Few Good Tips and Advice

Many people have fallen into the real estate trap for the wrong beliefs. A lot of people have this notion that nearly any property is an investment, but this unfortunately, is not the case.  Never ever make the mistake of thinking that all properties will be worth more than their value in a few years. To avoid this, try and follow some simple steps that will help you lead towards a real good investment.

>Never be in a hurry to purchase any kind of investment property. Take your time to find a property that meets the criteria of a good investment property. Remember, a good investment can turn into a lucrative venture, while a bad investment will lead you into a money trap. If you aren’t sure about investing in a property at all, ask help from knowledgeable real estate agent.

>Above anything else, think about the location of the property before you buy it. The property that you are considering should be located in an area, or at least relatively close to an area that has a lot of job opportunities including schools, shopping malls, and transportation.

>A safe neighborhood is one of the most important considerations that makes a property a sought-after property. If you are going to purchase a rental property, find out what the going rental rate is within that neighborhood.

>Find out how landlords in the area are doing with the current market by speaking to them. This is the best way to gather information.

Should I Buy An Investment Property Now?

Venturing into property investment requires a significant amount of money. This is why you have to discern when a good time to purchase an investment property is. But how do you determine profitability? A helpful starting point to decide if investing in property in the United States are:

1. Market Maturity
The US is a highly developed country with a mature market with world class communications, finance and property sectors. Real estate prices are also virtually on an all-time low. Just make sure that the price of the property you purchase would not further go down.

2. Language Advantage
English is considered the most spoken language so that communicating will not be a problem.  This is an important aspect for investors.

3. Well developed property laws
United States, being a first world country have clear, well developed property laws.

4. Easy to buy and sell property
Laws and customs are in place for property transactions so that buying and selling can often be done in one day; offering an opportunity for profit in short timescales.

5. Lower tax rates
The US government is generous to business owners so that tax rates are lower compared to other countries.

Should I buy an investment property? The decision ultimately lies with you. One thing certain though is that it is important to examine any potential investment property closely before making the decision to buy, because although tough economic times means more opportunities, it also means more risks as well.