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Five Things You Need to Know About Taking Out a Mortgage for Investment Properties

Whether purchasing a property to rent out or flipping for a resale, an investment property can be a terrific avenue for making money. According to the Motley Fool, the average house flipper earns a gross profit of nearly $68,000 on each project. And iPropertyManagement.com indicates that the average landlord made $69,085 in annual income in 2022. That's not too shabby for passive income or a side hustle! However, it’s important to note that the rules may vary slightly for income-generating real estate vs. your standard owner-occupied home purchase. You’ve undoubtedly heard, “You’ve got to spend money to make money.” That phrase certainly rings true when it comes to real estate investing. In this article, the loan specialists at Mortgage Atlanta will lay out the top five things you’ll need to know if this is your first foray into taking out a mortgage for an investment property.

  1. Interest Rates May Be Slightly Higher on an Investment Property Loan: When purchasing an investment property, you may be more limited on the number of loan options available to you – primarily “hard money” loans, investment property loans, or a conventional mortgage loan (allowed on your first few purchases). With such limited options, you’re likely to run into higher interest rates – which will figure into your monthly payments. If you plan to renovate and flip the property relatively quickly, you may not have to worry long about the higher interest rates. But if you plan to use your investment as a rental property, your higher monthly payment may require you to raise your rental rates to ensure you still make a nice profit on your investment. Two important notes here on how to achieve the best interest rates: 1) keep your credit score as high as possible so lenders will offer a more favorable rate, and 2) tap the team at Mortgage Atlanta to seek out the best Atlanta mortgage loan with the best rates to fit your needs.  
  1. You May Have to Put More Money Down than you Would on a Primary Residence Loan: SparkRental indicates that while the average percentage of money down for a first-time homebuyer currently sits at a manageable 6%, you may run into a minimum down payment of (are you sitting down?)… 15 to 25% on an investment property loan. Again, this is a great time to lean into the expertise of the loan specialists at Mortgage Atlanta to hunt down your Atlanta real estate investment loan with the best terms.
  1. You May Incur Additional Costs with an Investment Property Loan: Lender and appraisal fees tend to skew a bit higher on investment properties when compared to owner-occupied properties. Additional appraisal forms may be required depending on the guidelines surrounding your Atlanta investment property purchase, which can tack on an extra $100. Lenders like Fannie Mae and Freddie Mac consider investment properties a higher risk, so you’re likely to incur heftier lender fees if you opt for a conventional loan.
  1. Find a Loan Specialist You Trust: If real estate investing is something you’re committed to and plan to grow from one to multiple properties, you’ll want to partner with an experienced loan specialist you can trust. An outstanding loan specialist – like the ones found at Mortgage Atlanta – will have their finger on the pulse of the real estate market and the latest rules and regulations related to real estate investing. What’s more is that we’ll be able to tap you into our vast network of real estate agents, appraisers, home inspectors, renovation companies, and lenders to help you achieve your goals.  
  1. You Can Form an LLC to Purchase Multiple Investment Properties and Broaden Your Loan Options: Once you feel you’ve got mad skills as a real estate investor, you may want to form an LLC to roll your current properties under and make future purchases on additional properties. This will limit your personal liability on each loan while expanding your borrowing power. While Mortgage Atlanta specializes in working with individual borrowers, we will happily provide the same excellent services to real estate investment companies. We can even connect you with a business attorney to help you form your LLC!

If you have any questions about investment property loans, we welcome you to contact Mortgage Atlanta’s Senior Loan Specialist and company founder, Brian Berman, at 678.564.1522 or bberman@mortgage-atlanta.com. To learn more about Mortgage Atlanta and our portfolio of services, please visit www.mortgage-atlanta.com!  





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