How To Choose A Term For An Investment Property Loan

When you finance an investment property you need to decide how long a loan term you would like, or how long you will take to repay the loan. Generally investment property loans can have a term of 30, 20, 15, or 10 years.

To choose between a longer term such as a 30 year fixed rate mortgage, or a shorter term such as a 10 year mortgage consider whether it's more important to have a lower payment commitment each month, or to pay less overall during the loan.

A longer term investment property loan spreads the repayment out over a longer period of time, which means the monthly payment will be lower. Shorten the loan term and you raise the monthly payment, but significantly reduce the amount of total interest paid by paying off the mortgage years sooner. In addition mortgage rates tend to be lower for shorter term programs.

Here's a quick comparison between a 30 year and 10 year loan term for a $200,000 loan amount (This is simply an example to illustrate the potential interest savings, not currently available pricing.):

30 year fixed rate mortgage:
Note Rate: 5.000%
Monthly Principal and Interest Payment: $1074
Total Interest Paid: $186511.93

15 year fixed rate mortgage:
Note Rate: 4.000%
Monthly Principal and Interest Payment: $1478
Total Interest Paid: $66287.79

In this example the potential interest savings of $120,224.14!

If you can afford the higher payment consider your other options for that money. Could you invest it somewhere else which would offer a greater return that would offset the interest savings? (In the example above would an investment of $404 a month over 30 years see a greater return than $120K?) Of course every investment has some level of risk, but it is important to weigh your options before deciding which loan term makes the most sense for your scenario.

Unique Move In Specials To Attract New Renters

Looking for a way to find new renters for your vacant investment property? Take an idea from commercial apartment complexes by offering a "move in special." Try one of these unique move in specials to set your property apart from the competition:

• Free use of a moving truck. (You could even provide movers for a high end property.)
• 1/2 off the first month's rent.
• Gift certificate to a nearby grocery store to stock the fridge.
• Restaurant gift certificate - either a nice place to celebrate the new home, or pizza for moving day.
• A hook up allowance - a discount equal to the cost of hooking up new utility, cable tv, and internet accounts.
• Gift card for a home improvement, home decor, or furniture store to help the new tenants make the place their own.
• Gift card for a gas station to fill the tank a few times.

Advertise the move in special in your rental ads and hopefully you'll be exchanging the keys for a rent check very soon!

Why Not to Become a Landlord

Interest rates are near historic lows. Home prices in many markets have not been this low in a decade. The US stock market is crazy and Europe's looks even more out of whack. Your smart, savvy, and think that now may be the time invest in a rental property. Well...Bankrate.com's recent Debbie Downer of an article may have you thinking twice about your decision. While this blog is geared for real estate investors, it never hurts to take a step back and determine whether you are a good fit for becoming a landlord. Bankrate.com's author, Pat Curry, notes that vacancy rates are up (note..this may date the article a bit since rates are down in many places) which can lead to stress and opening up your own pocketbook to meet your monthly mortgage obligations. Mr. Curry also points out that applicant credit histories are getting worse. Considering the tightening of lending guidelines, less people are qualified to borrow money. This fact has pushed more people with less than stellar credit into the rental pool. Evictions and dealing with tenants who owe back rent can be a nightmare. Plus, the down payment for investment property loans is now considerably higher than it was just five years ago. Still ready to take the plunge?

For more on the article, visit:
http://realestate.msn.com/article.aspx?cp-documentid=20619924

Other Helpful Posts:
Is Being a Landlord Right for You?
Fannie Mae Investment Property Guidelines

How To Winterize An Investment Property

Part of managing one or more investment properties could include winterizing those homes. It's important to protect your investment against the hazards of freezing weather and winter storms. How to winterize your investment property will depend on whether the home will be occupied or vacant during the colder months.

Here are some steps to follow to prepare your property for winter:

• Turn off the water at the sources to any exterior hoses, irrigation, and AC units. Drain the water from the hoses and lines before storing.
• Reverse the direction of any ceiling fans. Switch the blades to rotate clockwise to recirculate warm air that rises to the highest point in the room.
• Check insulation to be sure it will sufficiently insulate the home as the temperature drops.
• Store any outdoor furniture in a shed or garage.

If the home will be empty throughout the winter, for example a summer vacation rental that won't see renters until spring, you might want to consider having the home professionally winterized. This is generally done by a plumber and involves draining the water from the entire plumbing system and using an anti-freeze solution to ensure that the pipes and other fixtures aren't damaged by freezing water. 

The benefit is that the electricity can be turned off so that you don't have to pay to heat an empty home all winter to keep things from freezing, but you will need to pay the professional to return in the spring to de-winterize the property.