Investment properties can be an excellent way to build long-term wealth and generate passive income. However, timing is a critical factor to consider when diving into the world of real estate investments. One of the key aspects to understand is the down payment requirement for purchasing an investment property. Contrary to popular belief, you don't need to put 20 percent down to get a mortgage — some mortgages don't even require a down payment. You can get a conventional loan with as little as 3% down, although this may come with higher interest rates and private mortgage insurance.
Unlocking funds with a Home Equity Line of Credit (HELOC) on an investment property is another strategy that some investors utilize. By tapping into the equity of your property, you can access cash for renovations, property upgrades, or even to purchase additional investment properties. However, it's essential to weigh the pros and cons of using a HELOC and ensure that you have a solid plan in place for repayment.
Some investors may consider using their existing home equity to fund the purchase of an investment property. While this can be a viable option, it's crucial to consult with financial experts and consider the risks involved. Refinancing a rental property is another avenue to explore, as it can allow you to change the mortgage term, rate, or take out equity for financial needs.