Investment Property – Learning the Basics of Investing in Properties, Obtaining Loans and Better Mortgage Rates and Buying a Property For Sale Through Financing

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Defining Investment Properties

Before you can begin research on how you can do a certain thing, you must have an idea on what it is first to keep you interested. The reason you’re here  on this page is you already have some interest in properties as an investment. But what exactly is an investment property?

Investment properties are properties, like a house, commercial building, condominium unit or a piece of land that are not purchased to be occupied  by the owner or investor but are bought to create passive income. Investors usually buy these properties to rent it out or to hold it until the value appreciates so that they can get capital gains.

Things to Keep in Mind Before Property Investing

Investment properties can help you make a lot of money, that is, if you carefully plan and calculate risks before buying your first property. The first thing that you need to do is to research and learn all you could about this kind of investment.

There are a lot of online and offline resources that will help you learn all you need to know about investing in properties. Books, articles, seminars and clubs can offer you information and support if you’re just starting out with this venture. Most professional and long-time investors are choosing to join a property investment club where people network and help each other know the best deals in the area. They also teach strategies to secure lower rate loans and even sales techniques. Attending a real estate course or seminar may also be useful as you get to listen to seasoned investors who will give you tips on how you can succeed in investment properties. You can find many seminars organized by real estate companies and the movers and shakers of real estate investing industry, while clubs are available in almost every state. Some of the most notable clubs in the country are the Chicago Real Estate Investment Club in Illinois, Cleveland Investment Property Club in Ohio, WPI Investment Property Club in San Diego and Arizona, Atlanta Investment Properties in Georgia, Denver Investment Properties in Colorado, Jacksonville Investment Property and Las Vegas Investment Property. There are also clubs in the UK and abroad that can help you in acquiring overseas investment properties.

Online, you can get information from forums and real estate investment guides. There are even some online universities and institutions that offer courses on real estate investing, such as the Trump University. In their website you can find short courses from investing to getting insurance for your investment. There are also investment websites with a forum for investors, amateur and seasoned alike.

After reading and learning, it’s already time to apply what you’ve learned. Start with determining what kind of investment you want to have. Are you planning on being a real estate manager or landlord by renting out your place or do you just want to sell it for capital gains? Afterwards you need to know who your target market is. Will it be a family who needs larger rooms and kitchen? Or will it be someone who just started working and needs a home  near public transportation? The answer to this will let you know what amenities you need in your would-be property as well as the rental rate that you can charge.

Look for properties with features and amenities that are sought by your target market. Then to check whether it will satisfy them, make sure that it’s a place where you wouldn’t mind living yourself. Also, check the condition of the property, know if it will need much modification. Do you need to change the kitchen? Is there a rat infestation that you need to address? All these you need to find out because that would make you know the good rental rate or sale rate to charge your would-be buyer or tenant. Some real estate investors give the advice of investing in properties that are in locations which are accessible to you to make it easy for you to periodically check them.

Investment Property Financing – Before Looking for One

After you have decided that you want to get into investing and what your target market is, the next thing you need to know are your finance options.  It’s good if you can buy it in cash, but most serious investors and those who already own a number of properties automatically choose securing loan mortgages for their investments to give them the capacity to buy a property with minimal cash out and at the same time give them cash flow.

If you are a new investor, you are probably excited as you learn that getting into this investment will give you a lot of opportunity to earn money. But before thinking of that, knowing your fund options is very important as this will determine whether you will really earn or not. Now before you head on to a lender’s office, you must know that there are lenders who do not offer funds for investment properties, only for residential ones. Banks are another alternative source for financing your investment properties but they have stricter requirements.

Investment Property Mortgage Rates – What You Should Know

It is imperative that you shop around for better rates if you really want to take the advantage of your property’s earning opportunities. But to know which rates you could work on, know first what are the usual rates that lenders charge and what options are available for you. The lower rate, the better.

The first option is a fixed-rate mortgage. This one is best for you if you plan to hold the property for more than 5 years or you are thinking of refinancing. In this option, your monthly payments and your interest rate is fixed through the life of the loan. Commonly, this mortgage can be secured in a 30 or 15 year term. It has its pros and cons. The payment amount won’t increase when the market goes up which will give you more cash flow or earning opportunity. The disadvantage is  when the market goes down, you’re still keeping the same payments.

If you don’t plan on managing properties and wish to sell your property in just a short time after buying it, then getting an adjustable-rate mortgage is best for you. Taking a clue from its name, this one has an adjustable mortgage rate. It usually starts with a low interest rate and lower monthly payment albeit the computation can become complicated because of a number of things you need to compute such as indexes, caps, ceilings and adjustment periods. You might need the help of loan calculators

The last type is the balloon rate, based on a 30 year amortization schedule. This is the best option for you if you expect that your income or the property’s equity will increase in the near future and if you are certain that you can pay it off in 5-7 years as this follows that term. In this, you have the benefit of paying a lower monthly payment but you have to pay off after the term of the loan.

These three are the basic mortgage rates in the US, it might be a little different in the International market as tax laws and investment laws may differ but there are some things that are common in all markets. Generally, even if there are a lot of financing options available, knowing which ones will work best for you  depends on what future you are envisioning for your investment. The first one that you can choose is having 100 percent financing. This will be great if you’re thinking of selling your property in the future. The next one is the 95% piggyback in which 80% is the first mortgage loan and the other 15% is the 2nd mortgage loan. In this case, the first mortgage is a fixed property loan and then the second mortgage can be adjusted depending on your needs. There are still hundreds of options and scenarios available and it can be adjusted based on your needs and wants. Usually, lending company managers will be very much willing to work with you.

Ways to Secure Investment Property Loans and Other Funding Options

Financing is vital when you buy an investment property. However, presently, it is not that easy to obtain financing as more and more financial institutions, specifically the banks are hesitant to grant loans because of the number of delinquent borrowers in the past. You can however, still secure one although it may be very difficult. One thing that you need to prepare or have  is your business credit score. It is not advisable to use your personal rating because it will not give you the ability to get much money as you need. You can get the list of financing institutions through the Federal Housing Authority or FHA.

If you can’t get financing from an institution, you have the option of securing refinancing. This process of securing funds involves replacement of a debt with another debt under different terms. Most people would use their other properties to refinance to pay for the new investment property.  This is widely used by serials investors or those who already own a few investment properties as it helps in updating the rates and the payments needed on the current market condition.

Buying Investment Property – Who Could Help You

Because you have already set your mind on what target market you want to cater to and you have already decided what kind of financing will work best with your needs, you can now start scouring for properties. With all the decisions you have made, you should now be using the checklist of amenities you created. There are  tons of articles and ebooks to guide you in the process of buying investment properties, but to get you started real early, it is better that you look for a real estate management company and look for someone to talk to, however keep in mind that approaching these professionals might get you some deduction in your profit because of fees. Employing professional help though is a good investment because they will surely know what they are talking about and they will be able to explain things to you really well.

The biggest and most popular companies in the States are Harsch Investment Properties, Memphis Investment Properties, Huntsville Investment Properties, MBT Homes in Orlando, Florida, LNR Properties, Valley Investment Properties in Eugene, Oregon and Noble Investment Group LLC. Overseas there’s Folkes Holding in  West Midlands and London, UK, Erringtons in Spain, Harlequin Property in the Caribbean and Oasis Pacifico in Mexico.

Again, you could also get the help of your network of friends or your club to get better deals. Although you can get quotes from real estate companies upfront, asking people you know who are after your good can be better as you could probably get deductions in interest rates and great discounts from the properties they will refer.

Take Action! Find An Investment Property for Sale Now

Reading some helpful guides, asking around, learning how to use a loan calculator or analysis software will only help you invest if you decide to take action. As for any business, you won’t get any profit if you just keep on researching and you will take no action. With the recovering market condition in the first half of 2010, you are likely to be able to find great investment.

However, your success in your investment property will only begin if you start working on it right now by finding the right information, people and property and using the power of time and compound interest.