Tips For Obtaining An Investment Property Loan

Posted on: February 19, 2011

Categories: Buy, Investors

Author: lbuen

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Image by alancleaver_2000 via Flickr

Buying an investment property is no joke as it requires substantial amount of financing. All the more for multi-unit rental properties. However, savvy real estate investors know that they do not have to own plenty of cash to invest in a property. As long as they can secure a good investment property loan, they can get into a deal without shelling out funds from their own pockets. It would be wise to get pre approved for an investment property loan so that when the right investment knocks on your door, you are ready with your financing. But how does one obtain an investment property loan?

Preparing the Field For An Investment Property Loan

Raise That Score!

A good FICO or other credit ratings can give you access to a heap of funding not just for your personal property, but for your investment property, as well. If you are thinking of obtaining an investment property loan, take the time to tidy up your records and correct possible incorrect data that may have been mistakenly logged as well as update old information. Who knows, these inaccurate details may become the culprit why your investment property loan application gets declined.

Save Up For Down Payment

While there are ways where down payment is not required, such as seller financing, it is a good idea if you can squirrel away some funds while still looking for an investment property. Saving up to pay for 20 percent of your estimated amount for your investment property loan would be a good figure as it is the industry standard. You may want to try to obtain 100 percent funding by allowing the bank to hold your money in a Certificate of Deposit or other account that bears interest as collateral for the mortgage.

Study the Numbers and Be Ready To Justify The Investment

The bank or lender would want to know about the investment property and the forecasted profitability of the investment as shown in computations such as Return on Investment and Cash-on-Cash Return. Letting them know that you are well-versed with these figures demonstrates that you know what you are doing and will show them the color of your money when you make such investment. They would also want to know about your exit strategy for that particular real estate deal, whether you would be flipping it, rehabbing it or renting it out, among others. If you have real estate investing experience to boast of, let the lenders know. This will be brownie points for you because such experience indicates that you have a full grasp of the type of decisions that a real estate investor typically encounters.

Window-Shop For The Best Investment Property Loan Option

You can obtain your investment property loan from a number of sources. They may be banks or private money lenders. Compare the different terms and interest rates that they offer. If your credit standing is not that good, obtaining your investment property loan from a hard money lender may suit your needs. When making an inquiry, let the lenders know that you are shopping around and try to haggle for a lower rate. The proliferation of lenders and lending companies now will help you get a competitive price for your investment property loan.

The formula for securing an investment property loan includes polishing the magic numbers in your credit rating, growing the numbers in your wallet for downpayment, sharpening the numbers in your head to show mastery of the investment to lenders and weighing the numbers offered by different lenders.

 Tips For Obtaining An Investment Property Loan
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