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Buying an Investment Property

By Steven Roberts Updated on 12/6/2013

buying an investment propertyThe significant benefit to renting out your second home is the ability to create another source of income. Property investment is a great opportunity for homeowners pay for the new mortgage, while still growing equity in both residences. There are essentially two types of property investors, those that rent out their vacation home to a series of families vacationing for short time periods and those that rent the home as a means of living for a single family. Regardless of the rental implications, they will both be legally defined as property investments.

Residential Home Rentals

Property investors will invest in and manage a property as a landlord to tenants seeking a home to rent. Acting as landlord and renting your second home to someone will create a monthly flow of income. It is essentially a business venture and is very beneficial if affordable, because someone else is paying for the mortgage while you gain equity in the home.

Vacation Home Rentals

Vacation home owners may decide to rent out the property, on a part time basis to multiple families throughout the year. When vacant, the second-home owner may stay in the home as desired. Depending on the demand for vacation rentals in the area you choose, rental rates can be exceptionally higher. This can be a profitable decision - one month’s mortgage payment can be covered in a week of rental income. Although, pricing so high is not likely to rent the property on a consistent basis. 

Investment Property Loan Process

  • Prepare documentation
  • Get pre-approved with a lender
  • Find the investment property
  • Apply for a property investment loan
  • Make an offer on the home
  • Close the loan process
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About The Author:
Steven Roberts
Steven Roberts is an editor for Lender411. He specializes in mortgage and finance. Steven graduated from Cal State Long Beach. Contact him at Steven@Lender411com.

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