An investment property is real estate that isn't a primary or secondary residence. It's a piece of property that will not be occupied by the owner. Instead, the property is purchased in order to generate a profit, either through rental income, a future sale, or both. A home buyer may be interested in investing in real estate due to potential tax benefits or the opportunity to build up an investment portfolio.
An investment property can be a long-term commitment or a short-term endeavor, such as "house flipping", where a home is purchased, renovated, and then sold at a profit. Regardless of the specifics, the needs of real estate investors are different from the needs of a typical home buyer, so working with a lender who understands your goals is beneficial.
Whether a borrower plans to purchase a single-family home, townhouse, condominium, or multi-family dwelling, there are different requirements to secure a loan on an investment property versus obtaining a mortgage for residential purposes. Since investment properties inherently carry more risk, the financing guidelines are different from traditional loans - they also offer additional benefits:
- Rental opportunity: Renting out your property to tenants creates additional cash flow. Consider purchasing properties near downtown areas, vacation spots or college campuses as these are popular among renters.
- Increased cash flow: Your investment property can provide income to offset your expenses. You may even profit from your rental property!
- Potential tax benefits: There can be many tax advantages to owning rental properties, such as deductions for mortgage interest, property and real estate taxes. Be sure to consult a tax adviser.
- Build your investment portfolio: You can diversify your portfolio by owning an investment property.
Talk to us about refinancing your current home to buy an investment property.
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