The purchase of most any type of property – including residential and commercial – will usually require the buyer to put forth at least some amount of down payment. Doing so can provide the mortgage lender with a degree of assurance that the purchaser has some “skin in the game.” It can also allow the lender the take over the property with at least some equity in it, should the buyer stop making the mortgage payments.
Unfortunately, though, coming up with a sizable down payment can be difficult for some real estate investors. This is particularly the case if you already own other properties and have little in terms of cash liquidity.
There are several key factors that are considered by most lenders when it comes to the down payment requirement. These will usually include your income, your credit score, and your debt-to-income ratio. Lenders will also base their decision on whether or not you intend to reside in the property. For instance, if you are purchasing a duplex or a four-family residence, you may live in one of the units while renting out the other(s) to tenants.
Banks and other traditional lenders can differ in terms of how much they require for a down payment on investment property. While most require you to put down at least 20% of the purchase price, others may go lower, such as 15%. In order to qualify for the lower down payment, though, you will typically need to have a credit score of 720 or higher.
Once you have purchased a rental property, finding and managing tenants – as well as maintaining the unit(s) – can be time consuming. That being the case, turning over these tasks to a property manager can make sense.
If you own (or you plan to purchase) rental real estate in Orlando or the Central Florida area, contact us for more information on how including a property manager on your real estate investment team can help.