If you are wondering if now is finally the right time to invest in real estate, the answer is yes. Home prices are set to decline in 2021, before quickly rebounding once the economic recovery is in full swing.
That means that now could be the right time to snap up some bargain property that can earn you profits later, either through re-sale or as a source of rental income. Fortunately, you do not need to have the cash to hand in order to begin investing in property.
Rather, you just need to understand what the best loan structure for investment property looks like so that you can get your foot on the property ladder without breaking the bank. If you need a conventional loan for an investment property, here is what you need to look out for.
When determining your investment loan structure, your first port of call should be the deposit. Typically, an investment loan provider will ask for 10% of the home sale price as a down payment.
You may be able to find providers willing to accept a smaller sum, but this is rare. What is important is that you choose a loan structure with a deposit that will not wipe out your cash flow or saddle you with eye-watering interest rates.
A good loan structure for investment property will have built-in flexibility for investors. This can mean many things. First, it means that there should be no penalties for early repayment of loans, as you may want to pay off the loan quickly.
There should be flexibility on payment methods. This means you should be able to pay via check, bank transfer, credit card, or any other medium that you prefer. The loan should also offer flexible restructuring of the debt, in case your circumstances change.
Consider Interest-Only Investment Loans
A common investment property loan strategy is to opt for an investment only loan. This allows you to only make payments on the interest for a limited time. Since interest payments on investment loans can be tax-deductible, this will greatly improve your cashflow.
If you are busy paying off a mortgage for a home that you live in, this can be a godsend. It also means you can only pay interest and build up the cash to pay off the loan outright when you are able to.
Reduce Your Exposure to Risk
Finally, it is important to choose an investment loan structure that reduces your exposure to risk. There are many loan features to look out for that will lower the risk for you.
Fixed interest rates, larger deposits, and the total absence of payment penalties are just some of the ways that a loan can be less risky. A fixed interest rate means that the interest rate agreed upon when you take on the loan will not change or increase. In addition, you might want to reduce risk by opting for a smaller loan that only covers a portion of the cost of the property, if you can afford to pay the rest yourself.
Now That You Know the Best Loan Structure for Investment Property...
If you are trying to secure the best loan structure for investment property, we are here to help. You should always consult a professional before making any major borrowing decisions.
As experienced property managers, we can answer your questions. If you want property managers with years of experience that you can trust, do not hesitate to get in touch with our friendly and professional team today.