Unlike most residential homes, an investment property is one that is not the owner’s primary residence, and instead is used to generate profits. If it is primarily used for revenue, a property becomes considered an investment property.
Several types of properties fall into this category: residential rental properties, commercial properties, and properties purchased with the intention to renovate it and later flip it to make a profit.
Yes. In comparison to homes purchased as the primary residence, taking out a loan for an investment properties often comes with higher interest rates and a larger down payment. It can be difficult to receive a loan on an investment property, so the borrower must be prepared to put down at least 20% of the home price as a down payment and be able to prove good credit scores.
Be able to make a sizable down payment. The more you can initially pay for a down payment, the better your interest rates will be over the course of the loan. In addition, the higher your credit score, the better interest rates you’ll receive long-term.
It is generally more difficult to qualify for a loan on investment property than it is for a primary residence. Make sure you do your research and choose a property wisely before going through the process of applying for a loan.
It is also recommended to avoid investing in any property if you have any lingering debt — be it from remaining college loans or medical bills — or you can anticipate a large expense coming quickly. Lenders want to know that you have the funds to pay off the loan, and that you will continue to do so for the years on the loan.
Contact LoanLeaders of America, Inc. today for any interest in becoming involved with investment property or investment property loans!
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