Anyone who is familiar with mortgages may feel he or she is qualified to enter into a transaction for an investment property, but the two types of loans are somewhat different. While each entails a mortgage, investment property loans are not intended for owner-occupied properties. However, they have two distinct purposes: properties intended for as a rental and properties an investor purposes for flipping. If you are a new investor and are not familiar with the term “flipping,” this means you purpose a property with the intention to renovate it and resell it at a profit.
Investment Property Serves Two Purposes
When an investor begins looking for investment property lenders, he is looking to fulfill one of two purposes: he wants a property to rent or he wants to purchase a property (possibly a depressed property) in order to renovate it and resell it. Since both of these options do not involve properties the owner occupies, they fall under investment property loans rather than standard mortgages. Investment property entails several different choices including but not limited to the following:
Single family homes
Warehouses and other commercial property an investor owns and leases to corporations or individual business owners
Any other commercial or residential property in which the investor has an interest outside of occupying the property
Investment Property Lenders Include Traditional and Hard Money Lenders
Don’t be concerned about finding the right investment property lenders if you have credit issues that require you to seek out hard money lenders. In fact, hard money lenders are not in the business of making loans on owner-occupied properties, so they are perfect for your needs. Hard money lenders can help investors on many different projects that are beyond the capabilities of traditional lenders including depressed properties investors may purchase for flipping at a later date.
Rental Property or Flipping Properties
Before you consider property loans you should determine what you plan to do with the property. While this will not have an effect on the terms of investment property loans, it will allow you to determine your “break-even point” in order for you to see which plan will be more profitable. For instance, commercial hard money loans are extremely helpful for flipping because the investor will not be holding onto the property for a long period of time. However, investors who are interested in purchasing property as rentals will probably want to acquire a hard money loan they can later convert into a traditional commercial mortgage loan. Since hard money loans are short-term loans, they may not be suitable for the investor who plans to hold onto a commercial property for more than three to five years.
The important thing with investment property loans is to assess your needs before you make any final commitments. You also need to understand the entire process of investment property loans in both the hard money and traditional sectors in order to make the decision that is right for your needs.