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Investment Property Loans: What You Need to Know

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Everything you need to know about investment property loans.

property investment loan

If you purchase an investment property, you could create a steady stream of rental income. You can borrow money at a more competitive rate to purchase an investment property, but you need to have your money and credit in order and know what your options are for loans. After all, purchasing an investment property is a significant financial commitment.

Mortgage calculators are a great way to understand the impact of different loan rates on your monthly payment and overall loan costs. It can be helpful to play around with a variety of scenarios and interest rates to get an idea of what you can expect to pay.

Starwood Property Trust, a Greenwich, Connecticut-based real estate investment trust and the self-described largest U.S. commercial mortgage lender, announced in 2014 that it was providing a $100 million loan to back a large-scale apartment complex in California. The loan was part of a larger financing package totaling $400 million. This project was notable for its size and scale, and it highlights the range of financing options available for investment property loans.

In September that year, Pacific Investment Management Co. said it was providing an $85 million pre-development loan that Chetrit Group secured for a property in Manhattan. The loan package included a $320 million package from HPS Investment Partners. This is an example of a larger loan package that can be put together for an investment property.

About a third of all loans in commercial-mortgage backed securities maturing in 2023 are tied to real estate investment trusts, according to Fitch Ratings. These loans tend to be cheaper and make it easier to sell property, but they also require a greater degree of diligence in terms of understanding the terms of the loan and the quality of the real estate asset.

Secure Trust Bank (STB) and Aureum Finance have completed a £5 million property investment loan for a client with 14 Victorian properties in the East Midlands. The loan was secured at a fixed rate of 3% over a 10-year term and was used to purchase all the properties. This is an example of a larger loan package that can be put together for an investment property.

Investment property loans can also be an attractive option for those looking for a way to generate income. By purchasing a property and renting it out, you can generate a steady stream of income and potentially even benefit from appreciation over time. It can also be a smart investment that can appreciate in value over time.

When it comes to financing an investment property, it’s important to shop around and compare loan options. “Be sure to compare loan options from different lenders to get the best rate,” says James DeZao, a licensed real estate agent. “Also, keep in mind that if you decide to purchase an investment property with a loan, you should be prepared to stay in the loan for the long term. That means you may not be able to turn the property into your primary residence.”

Ultimately, investment property loans can be an attractive option for those looking to purchase and rent out a property. But it’s important to understand the terms of the loan and the associated costs before signing on the dotted line.

Extract Anonymous Image Description: A man and woman discussing loan options for an investment property.

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