Utilizing Leverage When Investing In A Rental Property

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One of the greatest advantages to investing in rental property is leverage, namely obtaining a mortgage in order to obtain an investment.  The ability to borrow money in order to pay for a rental property is dependent on an investor’s borrowing power and those who are looking to secure a property now should do so quickly in order to take advantage of mortgage interest rates before they go up.

Investing in rental property is the most common real estate investment because investors can take advantage of both leverage and cash flow.  Investors who have a solid credit rating should be able to obtain a mortgage with ease.  This will allow them to purchase an investment that is much more profitable than they could otherwise.  This will also allow them to save their liquid cash for issues at their rental property, like repairs, maintenance, or advertising to tenants.

Those who use leverage when investing in rental property won’t likely be able to take advantage of the current rock bottom interest rates.  Investors who want to purchase a commercial rental, defined by a rental with five units or more should realize that they are going to have to deal with a mortgage interest rate that is about two points higher than a residential mortgage.  The amount of positive cash flow that a commercial rental property will take in should account for this factor however.

Those who are interested in investing in rental property with the lowest interest rate possible should consider purchasing an investment with four or less units, as this can still qualify under a residential rental property.  Investors who are able to save two points on their mortgage interest rate will end up paying way less to the bank on a monthly basis, however, they will have less positive cash flow with only four units in operation.

Investors who are interested in investing in rental property and want to obtain a mortgage should do so quickly, before the rates jump up.  Since the QE program has come to a close, expect that mortgage interest rates will increase considerably over time.  The investors who are diligent about their investment, yet move forward with persistence should be able to acquire an investment before the rates increase significantly.  Investors should contact a number of different lending institutions in order to obtain the one that has the best interest rates and terms, as this will have an influence on their profit margins.

Those who are considering investing in rental property should take advantage of leverage in order to allow their money to work for them.

Asking questions with these tips in mind will help save real estate investors thousands.  For more ideas related to real estate investing, call or visit us a Homevestorsfranchise.com.  We are the nation’s number one home buying franchise with over 15 years of experience.  Our company has a vast assortment of real estate investment and real estate franchise opportunities available to help you grow your real estate business.  Come see us for more information.

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