Buying an Investment Property
Buying an Investment Property is a great way to diversify income streams and can lead to passive income, tax advantages and equity buildup. But there are many considerations before investing in property.
One of the most important is determining whether the rental yield will cover costs, such as mortgage repayments, strata fees, council fees, maintenance and insurance. Investors should also consider the property’s age, as it may have depreciation deductions which can help offset the cost of owning and operating the asset.
A Step-by-Step Guide to Buying an Investment Property
While a property that is designed with the needs of tenants in mind can improve its rentability, it is crucial to understand that if you don’t plan to live in the property, you may not be able to enjoy its features. For example, a garage, extra bathrooms, and a home office are all amenities that many tenants look for in their next home.
It’s worth talking to a mortgage lender who has experience with investment properties before making a purchase. They will be able to offer advice on what loan programs are available, including conventional loans (which don’t require you to live in the property) and FHA multifamily homes, which are ideal for investors looking to buy multiple units.
The loan programs that are available for investment properties differ from those used to finance personal residences, and credit qualification guidelines are more stringent. For example, a credit score of 720 or higher is often required for the best loan terms, according to Experian. Additionally, appraisal fees are generally more expensive than they are for residential homes because the appraiser will need to inspect each unit separately.…