Investment Properties

Thinking of buying an investment property?

The procedure for purchasing an investment property is identical to purchasing a home. The primary difference surrounds the down payment requirements as rules in the industry changed in April of 2010. The requirement now typically is 20% down. 

There are two main types of Investment Properties: Owner-Occupied and Rental

Owner-Occupied

If you are thinking of living in your investment property, there are some exceptions and limitations when it comes to qualifying and downpayment. In order to use rental income to qualify for the mortgage there must be TWO (or more) SELF CONTAINED units, and anywhere from 50-100% of this annual rental income can be used to qualify. Market rent will be used unless you have a signed lease. Air BnB income is not applicable.What typically makes a unit “self contained”?

The most important factors are:


1. Separate Entrance
2. Kitchen or High Functioning Bar
3. 3+Piece Bathroom

The property DOES NOT have to include:
1. Separate Meters
2. Duplex Zoning
3. Access to Laundry

Furthermore, the lender will typically allow less than 20% down payment if the investment property is owner occupied.

Rental

If you are considering purchasing an investment property IN ADDITION to your existing owner-occupied, or that you are not going to live in, there are differences from an owner occupied. First of all, if you are a first time homebuyer you are not allowed to purchase a rental property until you’ve purchased an owner occupied.

Second of all, every unit must be residential (R1 or R2 Zoning) and you must have at least 20% down, however some lenders require up to 35%.

Lastly, much like owner occupied properties, 50%-100% of the rental income can be used to qualify you, HOWEVER lenders almost never use 100% in this circumstance and REMEMBER, you must qualify to own both your owner occupied and your rental property.

Other

Student rental properties are more difficult to finance than a standard rental property as lenders deem it a higher risk. We encourage you to contact us prior to moving forward with a purchase of a student rental property.Any property with more than 4 legal units becomes a commercial property, regardless of whether it is residential or not. In these cases, a commercial mortgage is required and the requirements for this type of mortgage are substantial compared to a residential mortgage.