May 14th, 2007
Do you have to borrow 100% of the cost of your real estate investment, when the rental from the investment does not cover 2/3 of your investment loan repayment? Is it created cash flow issues for your real estate investment?!
These are common questions amongst many real estate investors. And there is no universal answer. Different answers apply to different investors.
Borrowing 100% of the price of an investment property enables investors to maximize tax deductions for their real estate investment. Maximizing tax deductions is an important task for investment properties, and it can ensure that where rental income is less than their investment loan interest, do not need to pay large amounts of income tax in 5-8 years time when the rental market for the properties they own strengthens.
Moreover, borrowing 100% on the investment property is always the ideal investment strategy for real estate investment.
However, to get loan for real estate investments in these circumstances may be difficult as banks/lenders normally only allow for 80% of the value of the real estate purchase price to be borrowed without LenderĄ¯s Mortgage Insurance. Particularly when an individual investor has 2 or 3 investment properties structuring 100 % investment loans is the key to success.
Being able to achieve this investment goal requires finance brokers to understand an investorĄ¯s circumstances, but also apply a thorough knowledge of bank lending policies. The key to real success is that property investors also maintain enough cash flow to for special circumstances so that more real estate can be purchased for future property investment.
For example, John is a small business owner whose home is worth $450,000. John also owns 2 investment properties valued at $320,000 and $380,000, bringing the total amount he has borrowed for real estate to $850,000. Should John organize 3 loans against each individual property, or should John organize a combination of 1 or 2 loans? As John is worried about interest rates increasing again by RBA, John would prefer to fix all interest rates, but John also has $35,000 additional income coming at the next 6 months which can be used as loan reduction.
What is the right investment loan structure to fit all of JohnĄ¯s requirements?
Which bank will provide the best solution for John?
How can John borrow 100% of the real estate investment purchase price?
There are no simple answers to these questions. We specialize in understanding lender/bank loan requirements and meeting with banks/lenders to accommodate the circumstances or special requirements of our clients.
Furthermore, if JohnĄ¯s home is owned by his personal name, and his investment property is owned by a company or family trust, then these investment property loans structure can be a very complex job.
An excellent financial broker is required to enable John to maximize his financial gains based on these complexes situation and Loanfor3properties can provide this service.
