You are looking at your budget or intend to speak to your financier about investing in the real estate. You have ticked all the boxes on your checklist, and you have received positive feedback from key people in the real estate business. It is only a matter of time before you embark on the journey of becoming a seasoned real estate investor. What you may never know is that there are things you will learn about as you climb the real estate ladder.
Do not Make Decisions Based on Emotions
It is about the numbers. Nothing less nothing more. You might like the floor tiles and the view of the mountains in the background, but so long as they are not adding a cent on the monthly rent, it does not matter. The critical questions you should be asking yourself are the taxes that are payable, how much will be paid in maintenance fees, the monthly rental income, etc. Focus on the returns. Look for an experienced agent who will be able to guide you.
You Might Need a Much Higher Down Payment
If you are buying a property that is not your primary residence, the financial institution will require that you contribute a down payment that is more than 20%. A primary residence is one where you intend to live there for at least 180 days.
You probably thought that the down payment is uniform across the board. Secondly, and this is good news, you will be able to break-even when you pay a down payment of at least 20%. This, in essence, means that your rental income should cover your mortgage repayment, taxes, and any other fees.
Your Residence is not Your Investment Property
When banks are evaluating your suitability for a mortgage, your residence is not considered. If you have partly occupied the property and partially renting, the bank still finds it as your primary residence. The bank will only use the rent that you are likely to get to reduce the risk when computing your mortgage.
Not all of your rental income qualifies when evaluating your mortgage Before banks give mortgages, they look at your disposable income, debts and your credit rating/score. If you want to buy a property that will provide you with pay, the bank will add about 80% of all the projected revenue from rent. This will push up the amount of mortgage that you will qualify for. Keep in mind that the bank will only appraise a property that was legally acquired. Secondly, evidence of expected rental income needs to be provided.
If you Raise More than 20%, Your Repayments Will be Low
One way of keeping your mortgage repayments down is by increasing the down payment that you are making to the bank. Do not forget to make a write off of your interest on a mortgage against rental income when you are filing your income tax returns.
Keep an Eye on the Taxes
The following properties are payable when buying a property for investment: capital gain taxes, income tax on collected rent and land transfer taxes.