Financing investment property is something that can be a stumbling block for new and experienced property professionals. The bottom line is that unless you plan to buy a property for cash, you will normally need to finance it in some way. This article gives you advice on what to keep in mind when thinking about how to finance your investment property successfully.
Find the Right Professional to Work With
This is perhaps the most important thing to do and is the piece of the puzzle that many first time property investors and developers fail to get right. Before entering into the World of making money from property professionally, most people don’t know a lot about the different professionals that are out there and the different roles they have in trying to work with you to help you to be successful.
The first thing that many people do to try and get finance is the talk to their local bank or financial adviser. This can be a wise place to start as you probably already have a relationship with them so things might run smoothly; however, the problem occurs when this is the only visit that the budding property investor makes and when they think this is the be all and end all.
There is a World of professional mortgage brokers, financial advisers and other experts, out there that are used to dealing property investors. The rates that they can secure and the access they have to products, often far outstrips those of which your local bank manager will have access to. To make your living from property, you must start to broaden you horizons and make contact with the best people to finance your property deals.
Make Sure you Get the Right Product
This should be straight forward, if you are working with good brokers or advisers. At any given time there are many different mortgage or loan products on the market, but you need to be able to find the one that is right for you and the specific project you are working on at that time.
If you are planning to hold onto a property for several years and you think that the interest rates are going to rise, you might opt for a fixed rate mortgage.
If you are planning on flipping the property and selling it straight on the you probably would not target a fixed rate. The important issue would be that there is not a penalty, or at least only a very small one, if you paid off the loan early because paying off the loan early would be exactly what you would be planning to do as soon as you sold the property.
This is why you need to get the right product for you and the project you are working on at that particular time. Financing investment property incorrectly and using the wrong mortgage or loan product could cost you thousands in unnecessary fees and it could turn what should have been an extremely profitable deal into a money pit.