Before you lay out cash for your next investment property or seek out financing, there is a great deal to consider. While each investor may find one method of buying investment property more favorable than another, both have drawbacks yet benefit investors.
Read on as we discuss the pros and cons of financing your investment property.
For beginners, financing your investment property gives you the time to build equity and get started on building your real estate portfolio sooner rather than later. In real estate, the benefits realized from taking out a mortgage if you don’t have the cash far outweigh the opportunities and years of appreciation on the investment property that would be lost waiting until you saved enough money to begin.
You can generate better cash flow by financing your investment property. By taking on the risk of a mortgage, you benefit from higher cash-on-cash returns, cash flow as it relates to actual cash invested in a property, calculated on a pre-tax basis.
By using other people’s money and financing your investment property, you can purchase more properties and diversify your portfolio to build security. In addition, having several properties in different areas makes it easier to ride out a downturn in one sector.
Return on Equity
Borrowing capital for your investment property nationwide also amplifies returns as you pay down the debt and the property appreciates.
Another benefit of obtaining capital for your investment property is the depreciation of the entire value of the house when you carry a mortgage, which can be very beneficial to your tax returns. You can also deduct the interest on the mortgage.
Financing your multi-family investment property adds a buffer of protection from depreciation. If the property drops in value, you have lost your cash equity.
Needing capital for your investment property may make you come in second with sellers considering multiple offers. It’s only natural that sellers prefer cash, which is a fast track to the closing table and has no lender to satisfy to ensure the sale goes through in the fast-paced real estate market we are experiencing.
Less Cash Flow
Mortgage payments and interest eat into your cash flow when using leverage for your investment property. While other expenses add up, your mortgage and interest on the loan will take the most significant chunk of your rental income.
Building up your creditworthiness and saving enough for a down, plus qualifying for capital for your investment property are all achievements that are much easier said than done. Although you may find the need for alternative financing options, speaking with an experienced investor like the professionals at Global Abundance LLC can help guide you over any hurdles you face in attaining financing or building your credit and savings.
Using O.P.M. (other people’s money) to pick up investment property means extended problems with payments from tenants or even vacancies are a more significant problem; carrying mortgages carries a potential for foreclosure and damage to your creditworthiness.
If you’re ready to buy, the professional investors at Global Abundance LLC will answer any of your questions or concerns. Our focus is on you at Global Abundance LLC. We’ll stop and take the time to listen so we can help you take the steps best suited to your unique circumstances to realize your investment goals. You can count on the full-service team at Global Abundance LLC, from locating the right investment property to property management and everything in between. Don’t forget to ask about our current inventory of the best investment properties available in the nation. Contact Global Abundance LLC at (800) 953-2124.