Loans for Investment Properties

Acquiring investment properties has become much more simplified in regards to the financing options available. Today's mortgage programs can allow you up to 100% financing of your investment property. There are several different loan options available that are set up to maximize your cash flow.

A Pay Option ARM and an interest only loan are great choices for mortgages on your investment properties. These will allow you to have the lowest payments possible to help you utilize your cash flow to its fullest potential. There are many more loan programs now for investment properties than there were a while back. You will generally pay a somewhat higher rate on an investment property than you would on an owner occupied property due to the higher risk involved to the lender.

The Pay Option ARM is a loan that allows you to make a minimum payment that is actually LESS than the interest payment. The amount you owe on the mortgage will actually go up each month, but your payments will be very small. For investors who will be making a great deal of money off of their property, this loan may be a great tool to maximize your cash flow.

If you are purchasing a home that is in a state of disrepair, you may want to look at a renovation or rehabilitation loan. Lenders will loan on investment properties up to 90% of the after repaired value. Monies are given out on a draw schedule similar to a construction loan.

Investors find these types of loans favorable due to not having to pay for repairs and remodeling out of pocket.

The flexibility of a pay option ARM is also a useful tool to investment property owners. Several of my borrowers use this loan not to increase cash flow, but to maximize the use of the rental income. While the property is rented they make the highest payment they can with just the rent, when the property is vacant between renters they utilize the minimum payment so there out of pocket expense is minimized. Investment property owners can also utilize the minimum payments if repairs are needed, etc. The minimum payment can off set the out of pocket expense of repairs and maintenance

Although it may seem like easy money, making money in real estate investing is a skill that takes research and experience to acquire. It requires a good plan and an understanding of the processes involved to either rehab a home or renting to tenants. Make sure you do your research and understand what you are undertaking. The last thing you want to do is put yourself into a situation where the property you buy costs you money every month.

Loans for investment properties are generally much more risky than owner occupied homes. To offset this risk the lender may require a higher down payment and a slightly higher interest rate. Also, if the investment property will be income producing then the lender will restrict how much of this income can be used towards loan qualification. Ask your preferred mortgage professional about the implications of buying an investment property with a mortgage.

Investment loans are so flexible they are allowing many investors to get into the game. It is a good idea to speak to your Mortgage Broker to see how we can get you an investment loan also!

In the world of real estate investing, a property that generates monthly cash inflow is always considered a sound investment. To create a positive cash flow situation, investors often prefer "interest only" mortgage products, which requires the homeowner to make monthly payments on only the interest accrued for the prior month. Because "interest only" payments are always lower than fully amortized payments, investors have a better chance of creating a monthly cash inflow.

Investment loans are similar to the same types of loans are available for owner-occupied personal residences. The main differences for investment property loans are that you pay a slightly higher interest rate and there are some down payment requirements.

A cash flow investor might opt to put 5% or 10% down when acquiring a property. This may allow the investor to obtain favorable financing terms and a lower mortgage payment.

Loans for investment properties can be more complicated than residential loans. Lenders will look to rent rolls and income to determine whether to make an investment property loan.

Loans for investment properties having more than 4 units are considered "commercial" loans for the purposes of obtaining a mortgage.

Loans for investment properties are a good way to purchase properties without using your own assets. Properties consisting of 1 to 4 units can be financed with a residential loan while properties of 5 units or more are financed with commercial loans.

» DISCLAIMER: The information contained in this article on 'Loans for Investment Properties' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.