Many investors are being turned down for mortgages at their banks. At Clover Mortgage we work with many institutional lenders that specialize in offering the best rates and terms specifically for rental property mortgages and investment property mortgages.
Although purchasing an investment property can be stressful, overwhelming and expensive, it can lead to steady income and large payoffs when you purchase the right kind of property and get the right kind of mortgage.
An investment property is a property that is bought with the intention of generating income or securing a profit. As a real estate investor you might be more inclined to invest a property for long term gains by renting it out to tenants and potentially selling it years later, or you might be more interested in a short term investment an would prefer to buy a property with the intentions of renovating it and selling it quickly at a higher price. This is also commonly referred to as “flipping” a property.
Both long term and short term investments come with their own benefits and difficulties. Long term investment properties that are being rented out can provide the borrower with a monthly income and can contribute towards paying off the mortgage. Long term investments may allow the borrower to deduct some expenses from their income and pay less taxes in the long run. Similarly, if their monthly expenses surpass their monthly income, they can potentially deduct those losses from their taxes as well. Clover Mortgage recommends that all investors speak with their accountants before deciding to buy an investment property to understand what the tax benefits or implications might be. Once the decision is made to purchase an investment property, Clover Mortgage can help arrange for the best possible investment property mortgage for you.
Although long term investments can be a great source of income, they can also be stressful for the borrower because the borrower must take on the responsibilities that come along with being a landlord such as collecting rent or lease payments, maintaining the property and financing all necessary repairs, finding new tenants, dealing with problems that may arise, handling tenant complaints, and more.
Short term investments such as flipping houses have the potential to earn a large profit for the borrower in stable or growing real estate markets. In fact, this is the main reason many people decide to invest in a property to sell it shortly after. This kind of investment can also teach you a lot about the real estate market and construction requirements while helping you develop new and important connections. However, although short term investments can lead to great profits, they can also lead to huge expenses and can actually lose an investor money instead of turning a profit. Similarly, the income you received once the property is sold may be subject to additional taxes such as capital gains tax, a tax rule that requires any profit from an investment property to be taxed as income. Once again, Clover recommends speaking with an accountant or tax professional before making the decision to buy a property for investment purposes.
Aside from the financial risks associated with buying and selling (flipping) an investment property, it can also be very stressful. With short term investment properties, a borrower must find the property, deal with the renovation process and find a suitable buyer all within a relatively short period of time. This process can be overwhelming, especially to a new investor who has invested a great deal of time and money into the property.
If you are new to property investments, you might be feeling slightly overwhelmed by all the steps you have to take. Luckily the experts at Clover Mortgage are here to help you create an investment mortgage or rental mortgage plan to help increase your chances of success.
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