The Mortgage Corner with Greenstate Credit Union - What does buying an investment property entail?

You’ve heard purchasing a rental property is a tangible form of investment diversification. But what exactly does buying an investment property entail? Let’s dive into the basics of real estate investment and questions you can ask to see if it’s a smart option for you.

Real estate investment benefits

Building a real estate portfolio offers a variety of benefits, including:

• Passive income: Steady rental income can help cover mortgage payments and home maintenance costs. Positive cash flow can also be reinvested, helping to grow your net worth.

• Tax advantages: Mortgage interest, property taxes, and operating expenses for investment portfolios can be deducted from taxable income. Real estate investors can also deduct a portion of a property’s value each year, again lowering taxable income.

• Diversification: Having a tangible asset, like a rental property, can help balance total investment volatility. Additionally, homes tend to appreciate in value over time.

• Flexibility: There are a variety of approaches to real estate investment. From single-family homes to multi-family developments and short-term rentals, options exist for the level of time and resources you and your associates may have to dedicate.

Questions to consider

While the decision to purchase a rental property involves many factors, we have summarized some common things to consider: 

• Are investment loan rates higher than primary resident loans? Typically, yes. Similar to a primary residence mortgage loan, your rate will depend on factors such as your credit history, debt-to-income ratio, and the size of your down payment. GreenState offers several loan programs, including both in-house and secondary investment loans.

• Can I refinance an existing loan for investment purposes? GreenState offers a variety of refinancing options, including cash-out refinances, that can provide you with a lump sum to make improvements to existing properties or expand your real estate portfolio.

• Can I purchase property with an LLC? On the residential side of lending, we are not able to finance a property in an LLC’s name however we do offer commercial loans that allow this.

If you’re interested in learning more about real estate investment options or would like to talk through any of our loan programs in more detail, contact one of our mortgage lenders at www.greenstate.org/mortgage to help you get started! 

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