5 Things You Need to Know About Rental Property Loans

A rental property is a great way to make some passive income.

There are many different ways you can go about renting, whether it’s a room in your home, an attached in-law suite, a separate unit in a multi-family house, or an entirely separate apartment building.

Being a landlord is a big undertaking, and there are certain risks associated with managing a rental property. However, the returns are quite lucrative and oftentimes, more than worth the risk.

Choosing to manage tenants is a big decision. Once you’ve decided to take the leap, it’s time to start considering your options for obtaining rental property and financing.

There are a few different ways you can go about rental property financing.

You do not need any formal qualifications to become a landlord. If you want to rent out property you own or lease, depending on the terms of your contract, you’re free to do so.

There are no licensing or requirements necessary to become a landlord. There is, however, licensing and requirements for your rental location and business. All businesses must operate with a business license. Plus, rental locations require minimum insurance coverage.

So, while you, individually, do not need to obtain any specific certifications or designations, you will need to prepare your business in order to start renting out your property.

If you’ve decided to invest in a rental property for passive income, this is what you need to know first.

When you apply for a rental property loan, you may need to provide a signed lease agreement to demonstrate how much your tenant or tenants will be paying you.

This helps the lender understand how you intend on paying back the loan. When they see that you’ve got a tenant already to move in, or a tenant already living there, they will likely feel more secure about the loan.

If your rental property is brand new and you have not yet been able to obtain tenants, there are other loans option available that may not require a lease agreement.

Do not assume that because you purchased a rental property, you have a right to live there. Some loans do not have any restrictions regarding owner-occupied properties.

However, some loan structures strictly prohibit the borrower from living in their rental property location. If you’re found to be violating the terms of your loan, your lender may be able to pull funding or penalize you in some other way.

There are many different loan options available when you’re looking to purchase a rental property.

Taking out a standard mortgage has a lot of different requirements and may not be the best option for your rental location.

For example, a standard mortgage will take your personal DTI into account and request copies of prior tax returns to verify your ability to repay the loan.

With some rental property loans, you may not have to provide tax returns or any information about your existing financial portfolio.

If you do not have tenants or a signed lease, you will need to demonstrate the value of your rental property by getting an appraisal.

A standard appraisal for an owner-occupied loan includes the property only. A professional appraiser will review the property and determine the present-day market value of the property to be sold.

This figure will help the lender determine the risk of financing the property.

With rental property loans, the appraisal process is a bit different and will include the potential income the property could bring in.

Rental investments are now more lucrative than ever. With platforms like Airbnb and VRBO, you can list your rental property in front of millions of people all around the world. Other online websites allow landlords to list dwelling locations for long-term lease.

It’s no longer up to a landlord to constantly promote their rental property. You can list it right online and have prospects inquiring directly with you.

A rental property loan is a great way to finance your next real estate venture. There is no reason to take out a standard mortgage or expose your personal finances to a business venture.

You can get financing for your rental property so that you can start earning income with real estate investments.

Here are the benefits of rental property loans:

• Earn passive income: With a rental property loan, you can earn income without spending your own money. Finance the property and use the rental payments to pay back your loan.
• Income potential is considered: When applying for a rental property loan, the lender will consider the income potential on the loan before making a decision on funding. This helps to give the property more value.
• You may be able to live in your property: Depending on the type of loan you take, you may be able to live in the rental residence. Some loans allow for owners to also serve as their own tenants as long as there is another part of the property being used as a rental.

Rental property loans are a great option to finance your next real estate venture. There are so many great benefits to purchasing a rental property using a rental property loan.

If you’re considering purchasing a rental property for vacation rentals, VRPL can help! We know the ins and outs of vacation rental properties and can help you with Airbnb financing.

Contact VRPL at 1-888-999-4375 today to learn more about how you can finance your next vacation property rental.