Are you planning to finance the purchase of an investment property? If so, you aren’t alone. Buying real estate as an investment for the future is a popular strategy, yet most people cannot afford to pay cash for something as expensive as a house or condo unit. As you get ready to finance your purchase and set your investment in motion, keep the following four tips in mind.
Financing an Investment Property
#1 – Have a Down Payment Available
This is a great place to start. When you have a sizeable amount of cash available for a down payment, you are going to signal to the lender that you are serious about this venture. It’s much harder to get a lender on your side when you don’t have much – or any – money to include in the deal. With a good down payment to work with, it will be far easier to get the lender’s attention.
#2 – Address Your Credit Score
You won’t be surprised to learn that a strong credit score is going to help you finance an investment property. If there are any issues with your credit score at the moment, work to improve those as quickly as possible in order to better your chances at good loan terms. It is not necessary to have perfect credit in order to get multifamily financing, but you want to avoid any big red flags that will give lenders cause for concern.
#3 – Be Organized
When you enter the financing process, you will need to provide some documentation in order to have your application processed. It makes sense to assemble as much paperwork as you can in advance, so you don’t have to scramble at the last minute to get it done. Also, as you are going through the process of putting your paperwork together, you can check for any errors or potential issues that can be rectified ahead of time.
#4 – Remember to Negotiate
All throughout the process, remember that you can negotiate to turn things slightly in your favor. That starts, of course, with the price of the property that you intend to purchase. The listed price is not necessarily the price that you’ll need to pay, so work with your agent to find a fair price that you can bid. After all, a lower purchase price is going to make it easier to close your loan in the end. Also, you may be able to negotiate the terms of your loan, so you can wind up paying less interest in the long run.