One of the greatest things about certain types of investments is purchasing real estate investments with other people’s money. With rental real estate this is true because you are able to use money from tenants’ rent checks for paying down the mortgages on your properties.
Sometimes, people think that they need to be large corporate investors in order to use other people’s funds. Yet, the truth is that you can make a nice income even by investing in just one rental property at a time.
If you plan on purchasing real estate investments with other people’s money, the important thing to remember is to be sure that the rent you are charging is an amount that is more than the mortgage and all of the other expenses that are due on your property.
Considerations When Applying for the Mortgage
When applying for a mortgage on an investment property, there will be varying terms with regard to the length of that mortgage. Many investors will choose to go with the 30-year term, as this will typically provide them with the lowest amount of monthly payment.
If this will allow you the best overall deal, then it may be wise to go with the 30-year term. However, oftentimes, the 15-year mortgage term may offer you a payment that will still provide you with enough “cushion” to receive a net income from your tenant’s rent check – and pay the mortgage off 15 years sooner.
In going this route, you will have the mortgage paid off in half the time. This will essentially allow you to obtain a much larger net income from your rent checks once the mortgage has been paid off.
Therefore, whenever purchasing an investment property, it is always a good idea to at least consider the shorter term mortgage prior to moving forward with your decision, as it may have the best long term financial outcome.
For more information, give us a call. We can help you manage your properties in the most profitable manner, while allowing you to enjoy the benefits of your investment.