What To Know About Investment Properties

investment propertyFor many, owning an investment property is a great way to generate passive income. After you put down the initial money to purchase it, you can either sit back and collect rent or you can spruce it up, wait for the property to appreciate in value, and then sell for a profit. While this certainly sounds attractive to many people, actually funding the property can seem daunting. Taking out a new loan when you already have a mortgage is a big step, but it is certainly attainable. In today’s blog, Family Home Loan Texas discusses the benefits of an investment property and how we can help you finance one.

What Is It?

It is a piece of property you buy with the goal of earning a good return on your investment. As noted above, this is typically achieved through renting it out or selling it down the road for a profit. Whether you own the investment property yourself or with a group of investors, it is important to do your research to determine its best use: residential, commercial, or mixed-use. Residential properties are ones that tenants rent from you to live in. Commercial properties are for businesses. While they do require more maintenance and strictly follow zoning, they also provide more money each month from rent. Mixed-use properties are ones that have both residential and commercial tenants. 

How To Pay For One

The most common way to pay for an investment property is with a conventional loan, which typically requires a down payment of around 30%. This is higher than the 20%  (or lower, in some cases) for your home purchase, but this is because these properties generate income and usually require more money down. If you go this route, your lender will want to see your credit score, income, and various assets. 

You can also use the equity you have built up in your home as leverage. This is called a home equity loan. Similarly, you can also use a cash-out refinance to free up the funds to purchase your investment property. If you choose to do this, you will refinance your home with a larger mortgage. With this higher amount, you will pay off what is left of your previous mortgage and pocket the difference between the two. You will then use this money to make a down payment on your new property. 

Contact Us For More Information About Investment Properties

Overall, this sort of property is a great way to generate income outside of your normal work. While it does require putting down a significant amount of money, you will likely achieve a good return on investment — if you do your research beforehand. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about how he and his team can help you through all aspects of buying a home or investment property.