Thinking about diving into the world of investment properties? Whether you’re looking to score a rental property for some extra income or flip a fixer-upper, knowing how to finance that investment is key. The process might feel slightly different than your typical home loan, but don’t worry—we’ve got the tips and insights you need to understand it all. Let’s break down what you need to know about financing your investment property!
Investment Properties Often Have Higher Down Payment Requirements
When financing an investment property, you’ll generally need to put down more money upfront than you would for a primary residence. While you can often get a home loan with as little as 3-5% down for personal use, investment properties typically require at least 15%. Before you take serious steps into becoming a real estate investor, you’ll want to ensure you have substantial cash reserves!
Getting a Loan? Your Interest Rate Will Likely Be Higher as Well
Interest rates on investment properties are usually higher than for primary residences. This higher rate can make a noticeable difference in your monthly mortgage payment, so it’s important to do your research and ask lots of questions to find the best deal. At the Potempa Team, we’re proud to offer competitive rates for all our loan products, including those most suitable for a real estate investor! Click here to get in touch with a member of our team.
Financing Your Investment Property Will Require Different Loan Options
Not all loans are created equal, especially when buying an investment property. FHA, USDA, and VA loans, common for primary homes, are not an option here. Instead, you’ll be looking at conventional loans or more specialized products like portfolio loans and renovation financing. We have over 70 years of combined experience, and our lenders are highly skilled at assessing needs to recommend the best products for each client’s scenario. We would love to show you what options you can unlock when you work with the Potempa Team!
The Property’s Condition May Affect Financing
The condition of the property you’re buying plays a big role in financing. If it’s a fixer-upper that needs major repairs, it could limit your loan options if you intend to buy it as a primary residence using an FHA or VA loan. However, on the investment side, picking up a property needing some TLC is often par for the course. We have worked with investors in forty-nine states and helped them secure financing for all kinds of properties, from those in need of major rehab to more cosmetic fixers.
Financing Your Investment Property with a Business Loan
If you plan to grow your real estate portfolio substantially, you might need to look at business loans instead of traditional personal mortgages. Business loans often require you to set up a legal entity, like an LLC, and they come with different terms and conditions. They can offer more flexibility if you’re managing multiple properties. Still, they also tend to have higher interest rates or shorter loan terms, so it’s important to weigh your options carefully.
Financing an investment property might feel different from what you’re used to with a primary residence, but the opportunity to build wealth through real estate is worth the extra steps. From understanding down payment requirements to knowing the loan options available, there’s a lot to know about financing your investment property. Whether you’re a seasoned investor or just starting, we would love to earn your trust and become your preferred financing partner. Get in touch with us at the Potempa Team today!
