With mortgage rates still sitting near record lows and detached all housing types registering declines, now might be a good time to buy an investment property. We have clients that contact us on a regular basis to take out their home equity at low rates for many different reasons, pay off high- interest loans, start a business, send their kids to college, and to purchase investment properties.

For example, with a $100,000 equity take out to purchase a $500,000 investment property, you would essentially be financing the property at 100% (20% from the equity of your home, 80% financed on the investment), during the first 5 years alone, the monthly interest portion of the investment would be approximately $1,000 per month, plus the interest from the home equity of approximately $350, add your property taxes of $200 and maybe $200 for maintenance or insurance, and you would be looking at fixed costs of approximately $1,750. However, here is where it starts to make sense:

Say if you were to rent out the investment property for $2,250 per month, you could generate a net profit of almost $500 per month plus the average of 7% annual appreciation in property value over the life of the loan. You could have the mortgage on the investment property paid off for you over 25 to 30 years and have a property free and clear for retirement or your kid’s inheritance.

If you would like to know how much you can afford, contact us for a mortgage pre-approval analysis.