Investment property loans are an excellent way to build your wealth, leave a legacy for your descendants and experience the benefits of depreciation and cash flow. When done properly and with care, even a small group of investment properties can become a significant wealth builder. However, many people consider acquiring financing for your investment properties to be a significant challenge. At InterestSmart, this process is a simple one.
Keep Your Cash and Income Needs in Mind
Investment properties require a level of liquidity that can take time to acquire. This is part of the reason why getting an investment loan involves putting down 20 percent of the property’s cost upfront. Another reason why you want to put in 20 percent or more is because with equity, you are less affronted by market fluctuations that could potentially reduce the short-term value of the property. Another reason why having sufficient cash is crucial to success with investment properties is because of necessary repairs and unexpected expenses that may compromise a financially less-prepared individual. At InterestSmart, we mandate proof of income and statements that demonstrate that you are capable of fulfilling your obligations. While your current income and cash supply is no guarantee of long-term solvency or that you will reach your investing goals, your cash and income are powerful contributing factors.
Your credit score and history are vital components of the lending process. Like any other kind of lender, InterestSmart is aware that we are making an investment into both the property itself and you. Even the best property, if poorly managed, can become a financial disaster waiting to happen. Because of this, we insist on a reasonably good credit score in order to be considered for an investment property loan. If your credit is less than it could be, now may still be a good time to seek financing if you are willing to make alternative arrangements. If you are creative, an investment property loan can still work well for you.
If Your Credit is Less Than Exemplary
Your credit does not need to stop you from investing even if it is less than excellent. In some cases, a past misstep or even something fraudulent may be keeping your credit below the level it should be. As the saying goes, every venture has a starting point. Your starting point may involve using an agency to aide you in repairing your credit. You may also want to get started by finding a partner whose credit is excellent. In many instances of investment properties, one partner puts forth excellent credit and a portion of the cash involved in the property, while the other partner manages the property on a day-to-day basis. The process is one of entrepreneurship, and you may find that a partner who has excellent credit or a significant part of the necessary cash to get started does not have the time that will be needed to ensure the property’s quality level and secure a lease with quality tenants.
Seek Help in Advance
Waiting until you are actually applying for your loan to begin working on your credit and situation is as poor a strategy as securing a sufficient source of income during the application process. Loans require a consistent track record. A major part of building a quality track record is ensuring that you have fixed any issues on your credit report and with your fixed expenses at least six months prior to applying for your loan. If you are going to consult with a credit repair agency or seek out a partner, do this in advance. Also, ensure that your credit rating is factual, accurate and that you are keeping all of your existing obligations in good standing.
Ways to Keep Your Best Credit Rating
Once you have a high credit rating, keeping this rating is essential, particularly during the application process. Many people make the error of assuming that closing an old account or paying off a delinquent debt immediately before applying for their loans. This strategy does not bode well for their chances of acquiring a loan, especially when it comes to older accounts. The older your accounts are, the better they look for your credit as a whole. Delinquencies should be off your record before applying for your investment property loan, as delinquencies can dramatically lower your credit score.
Choosing a Quality Property is Vital
Beyond your credit and capacity to ensure that the property is managed is the condition and location of the property itself. At InterestSmart, we issue loans for properties in a variety of neighborhoods in many cities. Because every property is unique and has value that is individual to its situation, the property must pass an appraisal before a loan may be made against the property you wish to purchase.