It’s no secret that buying an investment property can be a lucrative venture. Known to build wealth by generating both immediate and long-term income, real estate investments are an excellent way to add value and diversity to your portfolio. Unfortunately, it isn’t as easy as some might think, especially when securing financing. In the eyes of most lenders, rental properties assume higher risks than owner-occupied properties as they believe temporary tenants are unfavorable to the property’s value. Consequently, property investors are held to a higher standard by lenders and need to have excellent qualifications to be approved for financing. For first-time property investors, the approval process is as strict as it gets.
New property investors not only need to have excellent credit, a reliable proof of income, and the standard 25% minimum down payment to secure approval for an investment mortgage, they need to have professional experience and a business plan. Typically, lenders require new investors to have 2 years of property management experience to receive approval. For obvious reasons, this requirement is nearly impossible for first-time property investors to fulfill. As a result, lenders often require first-time investors to hire a professional property manager to manage properties funded through the loan.
This requirement can be a blessing in disguise for some property-owners, as property managers handle many of the day-to-day stresses of being a landlord. From screening tenants, to understanding tenant laws, to completing property maintenance and inspections, professional property management makes owning a rental property that much easier for first-time investors. Investors can also deduct the property management fees from their taxes as a rental expense.
Buying an investment property can seem intimidating, and first-time investors have more hoops to go through, but that shouldn’t stop you from generating income from real estate. First-time investors must simply take the time to understand the process of buying an investment. The rest is easy, especially when you hire an excellent property management company to protect and grow your investment.
If you are a first-time property investor looking to talk to a real estate expert about your new venture, contact Nicholas Lazarchick at 202-708-6292 or nicholas@pmichevychase.com.
