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Investment Properties

Real estate continues to be one of the most popular and widespread ways to invest and build wealth. An investment property is real estate purchased to have a return on investment or with the intent of generating income and building wealth. For most purchases you will generally be looking at securing a mortgage for the property. An investment property comes with a range of responsibilities and duties that you have to carry out as a landlord.

Like with any financial investment there are risks associated with buying and owning an investment property. You need to be able to make payments on your mortgage and be prepared for the costs of repairs, property taxes, and unexpected expenses. For all your investment property needs, trust the experienced team at Mortgage Squad Agents to find you a solution that is right for you.

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    What is an Investment Property?

    A property that you buy for the purposes of investing or earning revenue is what is known as an investment property. Investing in real estate is a common and popular strategy used by people all around the world to develop a robust portfolio that can build wealth and generate income. An investment property can be residential, single or multi-family homes, or commercial properties. The mortgage and financing of an investment property follow the same general concept as a regular home purchase. You have a mortgage, a down payment, an amortization period, and several other factors to consider when getting an investment property, but some of the rules may be different depending on the number of units, the size of the down payment, and the planned occupancy of the investment property.
     
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    What are the Advantages of an Investment Property?

    An investment property can be beneficial in a few ways:
    • Market Appreciation: An investment property can increase in value depending on market conditions. A good location or a growing local market for real estate can have your property substantially appreciate in value. This extra value can be cashed in on with a property sale or leveraged for a second mortgage
    • Rental Income: An investment property can generate steady and consistent income by charging rent. This can help your property pay for itself over time. Depending on your down payment and the rental market you may be able to secure rental income equal to or greater than your mortgage payments. The amount of rental income charged will be specific to the market. The “1% rule” is an informal estimation that suggests that an investment property is considered a decent investment if it generates approximately 1% of the property value in rental income each month

    What are the Risks of an Investment Property?

    While an investment property can be an excellent way to develop wealth and generate income there are some risks you should be aware of before buying:
     
     
    • Understand the risk of a mortgage: Buying an investment property can be expensive. In many cases you will be financing your purchase with a mortgage. Your rental income may not cover the entirety of your mortgage payments, you need to ensure that you can make your payments as per your mortgage agreement.
    • Be aware of high mortgage rates: If you finance your investment property you will have to pay interest on the mortgage. If your down payment is smaller or your credit score is low you may be subject to higher rates.
    Financial risk assessment / portfolio risk management and protection concept : Businessman holds a white umbrella, protects a dollar bag on basic balance scale, defends money from being cheat or fraud

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    Register your mortgage renewal date with Mortgagesquad.ca and you could WIN your first month’s mortgage payment upon renewal (see terms and conditions). When you register your renewal date with us, you are securing the lowest interest rate possible up to four months prior to your mortgage coming due. So, if rates go up prior to your mortgage renewing, you can still get the lower rate. If rates go down, you will still get the lower rate… it is a WIN WIN FOR YOU.

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    Tips for Getting a Investment Property

    Because the burden to prove eligibility is greater on self-employed individuals, it pays to be well prepared before applying for a loan. The following should be considered before going into apply for a Self-Employed Mortgage:

    Before you buy an investment property there are some additional things you should consider:

      • Are you ready to be a landlord? Having an investment property generally means that your property will be rented out. Are you comfortable with all the duties you may be required to do as a landlord? There are also many legal obligations that you should be familiar with as a landlord.
      • Consider your insurance options: Buying an investment property may require certain types of insurance. Your mortgage may require mortgage default insurance and some form of life insurance. You should also consider landlord insurance for extra protection. Many insurance policies can be packaged together and you may save some money by grouping them together.
      • Find the right location: If you plan to rent out your investment property you want a good location. You want an area where you can consistently rent out your property, and ideally you should consider the long term viability of the area, as well as things like the property taxes charged by your municipality.

    There are some rules and regulations to adhere to when purchasing an investment property. If you, the owner, will not be occupying the building then a down payment of 20% is required. If you are buying a multiple unit investment property and will be occupying one of then then there are different minimum down payment amounts. If there are 1 to 2 units where one will be owner occupied then the minimum down payment is 5%, if there are 3 to 4 units where one will be owner occupied the minimum down payment is 10%. 5 or more units are classified as a commercial property and will require a commercial mortgage for your investment property.

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    Commonly Asked Questions

    A private mortgage is a type of loan that is provided by private lenders instead of traditional lenders. They can be a great option for those who are self-employed or have an irregular income, a bad credit score, or have a non-traditional property.
     

    When you apply for a private mortgage with a private lender you are evaluated based on your property, your income, and any down payment or equity that may be involved in the deal. If you qualify for approval you proceed to negotiating mortgage terms with the lender.

    Private lenders typically charge a 8-20% interest rate. By providing a private mortgage for those with poor credit, unstable income, or without a long credit history, the lender is taking on a greater risk so the interest rates are accordingly higher than a traditional mortgage.

    Private mortgage lenders will secure their loan through your property so while they are considered higher risk than a traditional mortgage they will be less risky than an unsecured loan. It is important to understand the structure, terms, and conditions of your private mortgage when you sign on.

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