Posts Tagged ‘financing a rental property’

The Steps That Go Into Financing A Rental Property

Tuesday, March 22nd, 2016

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Real estate investors who want to enter the rental property field need to understand how to finance a rental property in order to take advantage of leverage.  The first step to financing a rental property involves contacting a number of lenders in the immediate area and obtaining a preapproval letter for a loan.  Next, search for a rental property that is affordable and perform due diligence on potential candidate properties.  After this, negotiate with the seller of such a property, allow the lending institution to perform an inspection on the property, and ideally, close on the deal.  At this point, investors should have enough liquid capital to handle surprise issues at a rental property, collect rental rates, pay off the mortgage every month, and ideally, collect a profit during the same timeframe.

When financing a rental property, start by obtaining preapproval letters from different lenders in the area.  Those investors who have been working on building up their credit over the years and have the necessary down payment to capitalize on a rental property should be able to obtain the best mortgage rates.  At this point, investors should analyze the loan terms, decide which one suits their needs the best, and move onto finding the most ideal property.

Investors who are interested in financing a rental property should scout out the market for a property they can afford.  Those investors who focus on ideally located rental properties and sellers who are willing to negotiate should end up with the best deal possible.  At this point, investors should perform due diligence on potential investments and narrow down to the top investments within their budget.  During this process, sellers may want to know whether or not a real estate investor is serious about purchasing a property.  Real estate investors who show these sellers a preapproval letter for a loan will likely convince them to take the negotiation process seriously, as one can clearly afford a property.

Those who are interested in financing a rental property should perform a cash flow analysis on their potential investments in order to determine which one is the most profitable theoretically.  At this point, investors should go ahead and negotiate with sellers, ideally working with one who is in a motivated position.  Those investors who end up with a property for the absolute best price should find that their lending institution agrees with the sale after they perform a property appraisal.

Those who are interested in financing a rental property should now sign off on the deal, assuming that they have enough liquid capital to handle surprise issues that may arise.  These investors should then go into management mode or hire a property management company in order to handle all issues associated with a rental property.  Those investors who are able to take advantage of a low vacancy rate should end up earning the positive cash flow they need to pay off their investment and collect a profit every single month.

Real estate investors who are interested in financing a rental property should be able to capitalize on leverage.

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.