Investing in real estate can be an excellent way to build wealth over time and create an additional income source, but it is also one of the more capital-heavy types of investments you can make. While you can get started in stock or mutual fund investing with just a few hundred dollars, that simply isn’t the case when it comes to buying rental properties. Before you even consider buying a rental property, it’s important to check an affordability calculator to do a quick financial health checkup.
Other than a personal loan, your bank might offer you a line of credit, which you can use to purchase a house or an investment property. If you can get a smaller cash advance than you’ll pay in monthly rent, then it could work. Consider rolling the amount over into a new loan as soon as the cash is spent. But make sure the terms of the loan are flexible, so you can renegotiate the amount and duration at a later date. Be careful of payday loans, which are expensive, short-term loans used to pay off credit card or student loans. Ask your lender about these.
Do you have to get an appraisal from an appraiser? What kind of appraisal do you need? Typically, appraisals are done by real estate professionals who provide information to assist in an appraisal. There are generally no fees for the appraisal, except for listing fees, and it usually takes less than a minute to complete. Unfortunately, appraisals don’t always mean a property will get a higher value when sold. Instead, appraisals reflect the sellers’ confidence in the property and that value will fluctuate depending on various market factors. You may have to wait several weeks or months for the property to be appraised by an expert.
Is there a way to do appraisal without an appraiser? Once you decide to buy a rental property, don’t get frustrated if the appraisal doesn’t match your expectations or the listing doesn’t appeal to you. Don’t be impatient. Rather than failing to make a purchase, consider what you need to consider in order to buy a rental property on your own, such as whether your budget will allow you to close on the property as soon as possible, what house you will want to buy and what amenities you will want to add. Paying a professional to do a valuation is likely to make the transaction more difficult. It may be worthwhile to consider a mortgage or loan modification or take out a small personal loan that can be used toward a downpayment, on a rental property that you may already own. The typical personal loan made for a rental property is between $75 and $100,000.
If you’re looking to pay off a large debt, a low interest rate might be more appropriate. Also, if you are thinking about refinancing your existing home mortgage, you might consider a line of credit from a financial institution such as a credit union, in addition to a personal loan. Loan term and maturity might be shortened to shorten your interest payments. Buying a rental property can be a savvy financial move and allow you to diversify your cash flow. The last thing you want is to be stuck with a rental property in an area that is declining rather than stable or picking up steam. Do you have to get an appraisal from an appraiser? What kind of appraisal do you need? To receive an appraisal, you should be asked to provide financial records or a credit report for the previous 5 years.
