Buying an Investment Property

Living Rent Free With Investment Properties

One way new investors approach buying investment properties is to leverage the better loan rates that apply to multi-unit properties if you plan to live in one of the units.

If you take up residence on your property, and collect rents from the other units, you can usually pay your entire mortgage and cover upkeep of the property while living rent-free yourself. This is a great way to get into real estate investing.

Just don’t get in over your head, as you’ll be living in your investment, and if you lose it, you lose your home as well.

Credit and Cash

Credit-qualification guidelines are NOT created equal. For loans 1 through 4, a minimum credit score of 620 is required. Loans 5 through 10 require a credit score of no less than 720.

There are also requirements when it comes to cash. In addition to the down payment, investment property mortgage lenders require 6 months of cash reserves available per property. In other words, if you own a primary residence and are buying an investment property, the lender will require you to have 6 months of mortgage payments (principal, interest, taxes and insurance) available for both properties.

For a better understanding of what it will take to purchase an investment property, ask your investment property mortgage lender for the estimated monthly payment. Or, use our Instant Rate Quote, available 24/7.

Benefits of Investing in Real Estate

Investing in real estate offers several perks, including the following:

• Steady Cash Flow: Rental properties generate consistent income through regular rent payments, which can either cover or exceed operating costs.
• Appreciation: Real estate typically increases in value over time due to market demand, inflation, and property improvements.
• Tax Benefits: Investors can deduct mortgage interest, property taxes, insurance, maintenance, and depreciation, saving them on taxes paid. Plus, long-term capital gains are taxed at lower rates, and 1031 exchanges allow investors to defer taxes when reinvesting profits into new properties.
• Portfolio Diversification: Adding real estate to an investment portfolio reduces overall risk.
• Inflation Protection: Investing in real estate can hedge against inflation. Typically, as inflation rises, so do property values and rental rates.
• Build Equity: Every mortgage payment builds equity, which can be tapped into through refinancing or home equity loans.
• Tangible Asset: Unlike stocks, real estate is a physical asset that tends to retain its intrinsic value even during times of economic downturn.
• Passive Income: Investors can earn income without daily involvement through the use of property management services.