Real estate is a great way to build long-term wealth. Combining the forces of leverage, appreciation and cash flow, real estate investment is an accessible way to provide for your financial future.
Leverage
Your 15-25% down payment purchases a much larger asset than other investments.
Appreciation
Your asset can increase in value over time, and typically does, especially if you’re playing the long-game.
Cash flow
The right deal can yield both positive cash flow and significant tax savings.
How to Prepare for Buying an Investment Property
Buying an investment property is not much different than buying a primary residence. You will spend time researching communities, shopping for the property, and preparing your finances.
For the best rate possible, you’ll want to put 25% down. However, financing is still available with down payments as low as 15-20%. Sometimes, you can even use expected rents to help you qualify.
When preparing to qualify for an investment property purchase you will want to gather your tax returns and all other income-related documentation to provide to your lender. In addition, your lender will need to verify your down payment. Be prepared to provide bank statements for your savings and checking accounts.
You could also consider turning your current home into an investment property and purchasing a new primary residence. If you choose this option, you will want to determine the market rent for your current home in order to determine if converting your current home into an investment property will be beneficial for you. Discuss this option with your lender as there are specific requirements for your current primary residence to be considered an investment property.
Mortgage Loan Products
Look for a mortgage company that provides a variety of investor loans. At Elevations, we offer single-family loans, warrantable condo loans, and small multi-family (1-4 units) loans with 25% down. We also keep our rates very competitive and our origination fees low, which helps you to make the most of your investment. Contact one of our mortgage loan officers to learn more about our real estate investment loans.
Colorado’s Strong Marketplace
Colorado has one of the strongest housing markets in the U.S. We are perennially at the top of “best housing market” rankings due to a wide variety of factors, including a solid economy and job market, higher education and research institutions, a growing population, and strong positive migration and a great quality of life due to weather, recreation, culture and more.
Between 1979 and 2012, housing prices increased from $100,000 to just over $400,000 in Denver and Fort Collins, and from $100,000 to about $550,000 in Boulder. And home values just keep going up.
Conclusion
An investment real estate property is a great option to diversify your investment portfolio. You’ll enjoy a more stable and predictable cash flow, tax benefits, an investment that appreciates over time and having someone else – the renter – pay down a significant part, if not all of, your loan. And in a booming market like Colorado, there is generally a plethora of renters and a strong housing market to keep the value of your investment growing. While any investment comes with risks, real estate is often a great option for longer-term investments.