Its value gets better with age- Property investment

Property or land value tends to double after every 7 years and this upgrade that a land gets on its value will provide better returns. Property that is purchased solely for the monetary returns that it would generate is known as investment property.

Rental incomes are generated from the investment property and so these properties are not used as residential properties and are instead rented out. Renting out portions of the house would cause discomfort and will not generate the required amount of monthly rental income. Therefore, a separate property is invested in and the benefits are enjoyed.

There are many reasons why buying an investment property is one of the best forms of investment.

• As mentioned earlier, rental income is available every month and this provides steady liquidity.
• Tax benefits can be obtained
  • When the rental income is lower than the interest on the property loan it is called negative gearing and this may be stated to get tax deductions.
  • Tax deductions may also be obtained when the depreciation of the property due to wear and tear is mentioned.
• The value of the property will only increase with time
• Investment on property is safer than investment on shares as it is less volatile.

The United States is an ideal place for investment as

• It is a great location for holidays. The United States receives about 40 million visitors per year and these visitors require a place to stay, this is capitalised to obtain rental income.
• There are many different types of properties to choose from, starting from independent houses to units in condo hotels. This allows individuals with varying amounts of money for investment to choose a property that would suit their financial stand.
• The weather that is on offer in the U.S ranges from freezing cold in certain parts of the country to mild warm temperature at others. This permits investors to choose a state with the climate of their choice.
• When compared to some of the European countries, the cost of living is comparatively low and a wide variety of products are available which make the U.S.A a shoppers delight.
• The U.S.A is well connected by flights and it is easy to reach the desired location.
• Apart from tourists, there are also a large number of people who migrate within the country, resulting in greater demand for rental homes.
• The economic crash has resulted in a slash in prices that can be capitalised to make sound investments at lower costs.

There are a large number of investment properties for sale and the property that would bring maximum returns and that which lies within the budget planned for investment may be opted for.

Financing the purchase for the investment property

Getting finance for the investment property would depend upon the following requirements:

1. Most banks provide investment property loans when at least 15% of the total value of the property is given as the initial payment.
2. The loan application should be filled with care and the required documents like income proof and verified assets should be provided.
3. The credit history is another important factor that would affect the loan amount. Those with good credit rating will be eligible for higher loan amounts.
4. The loan given also depends upon whether the property is a primary residence, an investment property or a second home.
5. The location of the property that is to be purchased is also very important as certain investment property mortgage brokers have different guidelines for property in cities and property in rural areas.
6. The permissible level of monthly debt to income per month, called DTI, varies from one lender to another.

There are many different types of investment property loans that are on offer and some of them include

1. The 30 year fixed mortgage- The rate does not increase and the payment per month remains the same throughout.
2. VA loans - These are offered to veterans or wife of veterans and include many benefits
3. 15 year fixed mortgage- fixed rate of interest for shorter terms

In the event that the primary investment property loan was availed at a fixed mortgage rate but if the market rate has consequently declined and there are other loans that are on offer at lower interest rates, an investment property refinance may be opted for. The money that is obtained as a result of the refinance can be used to repay the primary loan that was taken. The refinance may also be taken at a higher amount so that the money obtained can be used for remodelling the house, if required. However, there are certain tax conditions that are associated with refinancing and the individual is advised to seek the services of an attorney or a certified public attorney.

The next step after purchasing an investment property is to procure good investment property insurance. The insurance that is offered to home owners would not be enough and certain other insurance policies need to be opted for. For instance, the fire insurance policy is of critical importance. Flood insurance policy, if the area is near a waterbed, is another important insurance cover that would need to be taken up.

There are options for international property investment that allows the individual to invest in other countries, some of these countries offer better returns and can be considered for investment. While selecting a country where an individual would like to invest on property, the political climate of the country should also be taken into consideration.

Investing on property would, needless to add, greatly improve returns as the property value increases over the years, however, careful selection of the property should be exercised.

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