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How
to Buy Rental Property
Rental Property Buying Questions Answered PART 2
Before you
buy rental property, it's always important to eliminate any doubts
and know the answers to all your rental property buying questions.
Unearth the answers to your most
commonly asked and urgent questions in this Part 2 of our FAQ on
How to Buy Rental Property.
Have You Read
Part 1? If No, Click for
Part 1
of our
Rental Property Buying Questions.
The Real
Estate Prices in My Area are Skyrocketing! Should I Buy Now?
While there is no sure way to predict
the next great property boom
or bust, you should always follow the time-honoured business tactic on
how to buy rental property: Buy Low and Sell High.
Therefore never purchase a rental
property just because you want to ride on the waves of a real estate
boom. Remember that when you buy
rental properties, you are making a long term investment. If you invest
at the peak of a boom and property prices start sliding afterwards, you
will be paying for that mistake for a long time.
On the other
hand during a property slump, panicky owners will be dumping their
rental properties like there's no tomorrow so there are bound to be
more underpriced properties around. This actually makes it an excellent
time for smart investors to move in.
What
are the Actual Steps Involved in Buying a Rental Property?
If you are a first time property investor, the good news is that
it's not that hard to buy rental property. To begin with you will have
to decide on the type, size and location of your ideal rental property.
You can search for the rental property of your dreams with a bit of
help
from the local newspaper, online property listings and real estate
agents.
The next
major step is to find a mortgage lender to
pre-approve you for a rental property loan. With your financing worries
out of the way, it will be time for you to meet the property
seller and negotiate a deal with him. For a complete answer on this
rental property buying question, Click here for our
guide on how to buy rental property in 7 easy steps.
How
Much Down Payment Should I Pay for a Rental Property?
Unless you have an excellent credit history or own substantial
assets, most banks and mortgage lenders will require you to fork out at
least 10 to 20% of the property value as down payment.
If you cannot
afford that, the interest rates charged will be a lot higher plus you
may have to pay extra for private mortgage insurance PMI as well.
To
lower your borrowing costs and avoid any unnecessary expenses, we highy
recommend you to pay this required 10% to 20%. If you are not much of a
risk taker, you can always foot a larger down payment which will slash
your monthly mortgage payments and allow you to own the rental property
free and clear sooner.
What
Steps Can I Take to Pay Less for My Rental Property Mortgage?
The less risky that you are a
borrower, the lower your interest rates
will be. So brush up on your credit scores
and pay off any debts that you owe. Before you meet your lender for the
first time, have all your balance and income statements ready so that
you can show them your finances are in good health.
If the
market interest rates are currently low (such as during times of
economic recession), it's a good idea to go for a mortgage loan with
fixed interest rates to lock in those cheap interest rates. On the
other hand, you should insist on an adjustable rate mortgage ARM if
interest rates are sky high.
You can also go for a mortgage loan
with a shorter time duration such as 15 years instead of 30 so that you
will end up paying less interest overall. However this will increase
size of your monthly mortgage payments so make sure that you can afford
it first.
For more answers to your rental property buying questions on
mortgage loans, Click
here for our complete guide on how to shrink your rental property
mortgages.
Do you want to learn MORE practical
must-know facts on buying rental properties?
Return
from
this How to Buy Rental Property page to our Buying
Rental Property guide
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