Property investment provides you an opportunity to gain value in a rental property through a passive income through a buy and hold strategy or with equity building when you buy and sell to move your cash into a larger rental property. However, with a rental property investment, you will want to make sure you find the right loan to make the process successful and the purchase possible, and you should make sure the condition of the property matches its price and rental value. Here are some recommendations to help you purchase an investment rental property.
Look For the Right Financing
When you are buying a rental property, you can pursue financing from commercial and traditional lenders or from a private lender. As a first option, you can apply for a traditional or conventional mortgage for a loan based on your personal credit and income. However, because a rental property is going to generate its own potential income, you can look for commercial financing based on a property's cash flow and its historical tax returns that the seller can provide.
A private money lender can provide you with the funds you need to purchase a rental property, especially one that is more than just a few units. If you want to buy an eight-plex or an apartment building or complex with sixteen units, for example, it is better to look for a private money loan for the financing. With a private money loan, you will usually need to put a down payment on the property, but as an investor of real estate, you will get this money back if you sell the property.
Decide if you will need a short- or long-term private loan for your real estate purchase to evaluate the loan terms. Many private lenders will work on a short-term basis for a few years, but you can find a longer-term private lender. With a short-term payoff, look to have a balloon payment due at the end of the term, which you can easily refinance through a new private loan or through a conventional mortgage, and the interest rate will be a bit higher than traditional bank loans provide.
Contact a company like Precision Capital - Your Private Money Source to learn more about real estate private money loan programs.
Evaluate the Property
Before you make the decision to purchase a rental property, it is important to evaluate the property's physical and financial position. Inspect the property personally and also with a professional inspector, and also look at the financial records.
Review the property's current lease agreements and past tax returns to get a good look at its cash flow and expenses over the past few years. This will help you see if any major repairs were completed to, for example, fix foundation or drainage issues that caused mold growth. You will also be able to see how much rent was collected and if there was any rent loss. A large rent loss on a rental property can be a sign of more serious problems, either with the property and the tenants or its management.Share