Investing in real estate is a great way to build out your investment portfolio and bring in some extra income. However, financing an investment property isn’t cheap. There is, however, something called an “investor loan,” which is a mortgage designed with investments in mind. These types of mortgages generally allow a borrower to get loans at higher amounts than traditional mortgages. Securing mortgages for rental properties is typically more challenging than a traditional home loan.

1. Do your research

You should clearly know what type of property you want to invest in before you start talking to lenders. Also, be familiar with the area where the property is located. Be sure to research local market conditions and trends as well as the average rent prices in the area. All of this information will come in handy when you’re trying to secure financing for your investment property.

2. Consider using an investor loan

Investor loans are mortgages that are specifically designed for people looking to finance an investment property. These loans generally allow borrowers to get loans at higher amounts than traditional mortgages — and could even help you finance multiple properties at once.

3. Understand the risks involved

Investing in real estate is not without its risks. One of the biggest risks is that your tenants could damage your property or stop paying rent altogether. Another risk is that the value of your property could go down instead of up over time. Be sure to do your research and understand all of the risks involved before you commit to investing in real estate.

4. Talk to a mortgage broker

If you’re serious about investing in real estate, it’s a good idea to talk to a mortgage broker who can help you navigate the lending process and find the best loan for your needs. They can also help you compare different loan products and make sure you understand all of the terms and conditions involved in each one.

5. Get pre-approved for a loan

Before you start shopping for an investment property, it’s important to get pre-approved for a loan so that you know how much money you have to work with. Pre-approval will also show sellers that you’re serious about buying a property and will give you an edge over other buyers who haven’t gone through this process yet.

6. Save up for a down payment

One of the most difficult parts of financing an investment property is coming up with a down payment – especially if you don’t have much money saved up already. If possible, try to put down 20% so that you can avoid paying Private Mortgage Insurance (PMI). You may also be able to take advantage of special programs like Fannie Mae's HomeReady® program, which offers low down payment options for qualified buyers .

7. Shop around for the best deal

Don’t just choose the first lender that approves your loan application — shop around and compare rates from multiple lenders so that you can get the best deal possible on your investment property loan.

8. Review all documents carefully before signing anything

Once you’ve found a lender and been approved for a loan, it’s important to review all documents carefully before signing anything. This includes the loan agreement, promissory note, mortgage documents, etc. Be sure that everything is correct and that you understand all of the terms and conditions involved in taking out the loan. If there is anything that you don’t understand, be sure to ask questions or have someone else look over the documents before moving forward.

9. Close on your investment property loan

Once everything has been finalized, it’s time to close on your investment property loan! This process usually takes place at a title company or closing attorney’s office. You will sign all of the required paperwork and pay any remaining fees at this time.

10. After closing: Start generating income from your investment!

After closing on your investment property, it’s time to start generating income from it! This may involve finding tenants, if it’s a rental property, or making necessary repairs/improvements if you plan on flipping it. Either way, once everything is up and running, congratulations –you’re now a real estate investor!

Investing in real estate can be a great way buildout out your investment portfolio - but it's not without its challenges, especially when it comes to financing an investment property. There are however some options available - such as investor loans - which can make financing an investment more achievable.

As with any type of investment, it's important to do your research beforehand and understand all of the risks involved. If done correctly, however, investing in real estate can be very rewarding.

Have any tips on investing or experience with doing so yourself? Share them with us!

Matt Witte strives to be the best realtor in North Andover MA.

Any questions about real estate, reach out to Matt Witte North Andover Realtor MA