When you’re buying a home for rent, you may be able to buy property outright. Some investors also choose to sell one property before buying another. However, if you’re expanding your rental property portfolio and you need to finance an investment property, you need to know how to secure property financing.
Be Prepared
Be Prepared The Seattle housing market is hot, and interest in rentals has been increasing for a number of years. According to GeekWire, “Seattle has consistently been the hottest housing market in the nation over the last few years, buoyed by the city’s thriving technology industry.” At the same time, tenants are avidly looking for new homes, driven by the same job market forces as housing sales, so the rental market continues to be strong.
Competition for homes in Seattle can be fierce. If you’re thinking of adding a new property to your rental portfolio, you need to get your financing ready as soon as you can, so that you’re ready to make the purchase when you find the right property.
Gather a Large Down Payment
Having the largest down payment possible can help you save on interest later on. While you’ll need to have 20 percent down, putting at least 25 percent down will help you save on interest. According to the American Apartment Owners Association, “if you can furnish more than 50 percent, you might even be able to attract a hard money lender on far more favorable terms.” If you’re not quite at the level, you’ll need to strive to get that larger down payment. You can also get creative and look at peer-to-peer lending possibilities or consider using a line of credit to top up the down payment.
Show That You’re Responsible
Before you try to find financing, look at your credit score. If it’s not strong, look into the reasons why and determine how you can remedy them. Show that you have financial backup in case of emergencies. For instance, if you can’t rent out a property for a few months, will you be all right financially? You need to have reserves for each property. According to Bankrate, “having reserves in the bank to pay all your expenses — personal and investment-related — for at least six months has become part of the lending equation.”
Look At Financial Alternatives
If you’re having trouble finding financing for a property, there are alternatives to going to the biggest bank in town. You can also go to smaller neighborhood banks to find financing. If you can’t get a traditional mortgage, you might consider seller financing. With seller financing, you are the owner but you pay money monthly to the seller instead of to a bank. To take this approach, you need to be organized and show the seller that you have a history of following through on your financial commitments.
At Lori Gill and Associates, we’re here to help you with all parts of your Seattle rental property equation. We can help you find tenants, manage your properties, and we’re also a resource for owners in the Seattle area. Connect with us today.
