An investment property is real estate bought with the intention of generating income.
Investment properties are alluring. It’s easier to rent out your home long-term for added income than paying for it yourself as an additional home or vacation home. It allows other people to pay for your property and you gain a property to sell for higher value later or grant to family down the road.
Demand is high for rental properties in Texas. In the first half of 2021, just over 4,000 new homes became available to rent in Austin, according to data from Apartment Trends.
Now is the time to get an investment property, but what are they and what do you need to know before going through with it?
Read Our Blog: How to Buy Your First Investment Property
What Is the Minimum Down Payment for an Investment Property in Texas?
The answer is not as easy as we want it to be. It depends on your loan type, credit score, and a few other factors. A general rule of thumb for investment properties is 20% down.
These down payments are larger than the average conventional mortgage because lenders need to protect themselves against risk when underwriting loans for real estate investment.
According to the Mortgage Reports, lenders also expect a better credit score than your average homeowner and want to verify your ability as a property owner. A 700 credit score is ideal for investment property owners.
Generally, lenders prefer to see historical evidence of property ownership and caring for tenants, but an effective way to get around this is to hire a property manager to handle these services.
In many states, investment property owners who move tenants in must have their homes cleared by state inspectors.
Keep in mind that six months of cash reserves should be available for each property.
Read Our Blog: Real Estate Investment Formulas to Know
How Much Investment Property Can You Afford?
The best way to estimate if you can afford an investment property is to go through a mortgage preapproval process. This process proves what your ideal budget is for an investment property. If you ever had a lapse in tenants, this proves you can handle that additional payment.
While waiting for the results, it would be wise to investigate rental property trends in your local market.
Keep these expenses in mind for your investment property:
- Landlord insurance
- Property taxes
- Maintenance and repairs
- Property management fees
- Vacancies
- Utilities
Read Our Blog: Loan Types Best for an Investment Property in Texas
Invest In Your Future Today
Finding the money to take advantage of an investment opportunity doesn’t have to be an obstacle. With several options to choose from, Park Place Finance can help you move forward into the future with our investment property financing. Contact us today to discuss your next investment!