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Buying An Investment Property or Second
Home
By Brent Bourdeau
Partner at Elliott Bay Mortgage
Do you have some money saved up and don’t know what to do with it?
Did you recently get a raise? Consider using these funds for a
second home or an investment property. Real estate in the Northwest
has proven to be a fantastic investment and interest rates are still at
record lows. First, you need to establish your investment goals.
Here are examples of some of the questions you might have to ask yourself:
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If you’re buying a
second home:
What monthly payment are you comfortable with? Can you rent out the
property when you’re not using it? Are you planning to keep it for a
certain number of years or are you planning to retire there?
If you’re buying an investment property:
How much of your monthly payment needs to be covered by the rental income?
Are you planning to accumulate a number of properties and hold on to them
until your retirement? Are you looking to sell the property after a
few years and use the proceeds to invest in something else? |
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Meet with your accountant and address expenses, tax benefits, etc. to
determine what makes the most sense for you financially. Once you
come up with a budget for your investment property, meet with a loan
professional to find out how you can realize your plans. It’s often
easier than you think. There are several loan programs that help our
customers realize their dream of second home ownership, such as:
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Home Equity
Line of Credit
Use the money invested in your current home to finance the
purchase of an investment property! The house you own likely has
equity available to help with a down payment and more for a new
home. This way you can keep your existing savings and investments
in the bank while giving you the price benefits of larger down
payments on your investment.
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Fixed Rate
Interest-Only Mortgage
A loan product that creates a lower monthly payment for the
initial period of owning the home, typically 10 years, while
owners become more acquainted with the costs associated with a
rental property. This is great for your cash flow and gives you
the comfort and stability of a fixed interest rate.
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Adjustable
Rate Mortgage (ARM)
This product also offers a lower payment for the first years of
owning a property, as the ARM introductory interest rate is often
lower than a fixed interest rate. One may also have an option of
an interest only payment if you really want to lower cash flow.
Payment rates can be as low as 1% on these products.
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Something to keep in mind is that you can combine any of these products.
You may take out a Home Equity loan for money down, and then do a Fixed
Rate Interest Only loan for the remaining balance. The design is up
to you and your budget!
Finally, you need to meet with a real estate agent. He or she can offer
advice on the various communities, which are best suited for your long
term goals, and offer insights on the current market conditions, which may
affect your purchase. Once you pinpoint a search area, your agent will
show you which homes match your requirements, and work with you to get the
home at the best price.
More often than not, an investment property is an easy way to grow a more
diversified financial portfolio. The dream of owning an income
producing property might be much more of a reality than you think!
For more information on this or other financing matters, feel free to give
me a call.
Brent Bourdeau
Copyright © 2007 Brent Bourdeau
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