“There’s been a lot of talk about rental properties lately and it’s no wonder why. With the rental market getting hotter by the day, and prices continuing to increase on the housing market, a lot of people are finding renting a better option. And while for the moment, renters can rejoice and enjoy being on the sunny side of home ownership (or lack thereof,) they aren’t the only ones benefiting from this current switch in the marketplace, investors are too. And even homeowners that never considered themselves to be the savvy investing type are finding themselves looking at investment properties. But before getting too tempted, homeowners need to first look at their own current home.
Before investing in a rental property, the mortgage – as well as any second mortgages – on the residential property, first need to be examined. It simply makes no sense to put money into another property when you owe too much on your existing one; and many lenders won’t even consider you for if the loan on your first home is not in good standing. That being said, you still must do your own due diligence, and be honest with yourself when it comes to what you can actually afford. Having a secured line of credit on your current property might not automatically disqualify you for a loan on that investment property. But you want to make sure that you don’t owe too much on it and that it’s not going to negatively affect your debt-to-income ratio when it’s time to apply for the mortgage on the investment property.
Once you and your mortgage are in good shape to take on an investment property, there’s still one more thing you have to look at in your own home. This one has nothing to do with how strong it is financially, but how strong it is physically. Remember that you’re not only about to take on more debt, as well as the extra income to pay it off, but you’re also taking on more repairs and maintenance for another home. These repairs alone might come up at the most unexpected time and when you’re not sure how you’re going to pay for them; having repairs that need to be done on your home at the same time will only exacerbate the problem. So before you start looking at investment properties, take a good look at your own home. Is the roof in good shape? Are the furnace, fridge, and all other major appliances running properly? Are the carpets going to need to be replaced pretty soon?
Even when you’re in the best of shape – both with your mortgage and the actual condition of your own home – you then need to sock away some savings. With any investment property you’re most likely going to end up paying the mortgage payments for at least a few months when the property sits vacant as people move in and out. Having those funds saved away will make sure you can always at least afford your investment property, even if you’re not getting a return on that investment at the time. “
