You should probably take a look at the locations with the best investment property mortgage rates of 2018 before making the decision to buy.
Location, location, location. Knowing where to invest and when to invest in that area is key for any real estate investor. The real estate market could be on fire in one city and ice cold in another. We’re going to explain why mortgage rates are important in the real estate market and name the areas with great rates. But before listing where you can find the best investment property mortgage rates, let’s cover a couple of things.
Related: Cash Investment vs. Mortgage Investment- Pros and Cons
Choosing the Right Real Estate Market
We all know that, when choosing a place to invest in, real estate investors have two options. The first is to do some research and analyze certain characteristics of the market. When we’re talking investment property mortgage rates, we want to identify the areas with favorable local laws. The new tax reform of 2018 has changed the guidelines regarding mortgage interest deduction in unfavorable ways. So keep the effect of new laws on certain cities in mind when it comes to financing investment properties.
Related: All You Need to Know About Investment Property Tax Deductions
After that would be to use an investment property calculator which provides metrics on returns- like Mashvisor‘s. Mashvisor’s investment property calculator will give you all the necessary information you’ll need for any real estate market in the US. By looking at things like the cap rate, cash on cash return, occupancy rate, and rental income of a certain market, you can easily choose which city is best for you!
Investment Property Mortgage Rates & The Real Estate Market
So why are we talking about real estate markets when this blog is about investment property mortgage rates? Well, because everything that has to do with buying an investment property is connected. Let’s give you an example of this to clarify a bit more:
Say you were interested in investing in an income property. You’ve already set your budget and have done all the research. After your visit to the local bank, you found out the mortgage rate for your investment property loan was, let’s assume, 4.5%. You qualify for the loan and are prepared to say yes to this deal. But hold on, what’s motivating you to say yes? What makes you think you’d be able to make the mortgage payments? Here’s where our investment property calculator comes in. Any property investor knows how to make money in real estate in these situations. You have got to check out the occupancy rate, the cap rate, etc. to give you an idea of the kind of rental income you’d be generating. These metrics pave the path for your investment property financing process.
Real Estate Investment Loans
Another thing we need to get straight is the type of mortgage you’re taking out. There are different investment property mortgage rates for different kinds of mortgages. Take a look at the following list to understand more:
- Fixed Rate: the one most popular among low-risk investors. There’s a stable mortgage rate throughout the lifetime of the loan and fixed mortgage payments. It’s not always guaranteed to be the lowest, but it’s great for investment properties you intend to hold for many years. The rate won’t change or be affected by fluctuating market trends, so it’s a safe bet. According to Freddie Mac, the 30-year fixed rate hit 4.66% which is higher than last year. Rates are expected to just keep getting higher and higher as the years pass, so this could be your best chance at a fixed-rate mortgage plan.
- Adjustable Rate (ARM): this type of loan is great for an investment property you won’t be holding for a long time. The rate is adjustable- it can change. Property investors who prefer this are people looking for lower initial rates. Investment property mortgage rates typically start out low and then increase as the years pass. If you’re afforded enough time to sell the property before loan rates adjust, you should choose this plan. ARMs are expected to be riskier than fixed-rate mortgages but that’s not what recent stats are telling us. ARMs are 30-year loans that are fixed for a specific period: 3, 5, 7, or 10 years (depending on the plan you choose). Rates change based on rates after the initial fixed period. However, adjustable rates have been found to be rising more slowly, even as fixed-rates increase, as of the beginning of June.
- Interest Only: exactly what the name means, you only pay interest- no principal. This is the least costly plan for a flip resale in a short time period. To learn more about the fix & flip strategy read this: Real Estate Investment Strategies Guide: Fix and Flip.
Related: What Are Options for Investment Property Mortgage Loans?
Where to Find the Best Investment Property Mortgage Rates 2018
Alright, now that we’ve covered the basics, let’s get down to business. It’s 2018, you want to make the best real estate investments, and you’re financing this purchase with an investment property loan. Where can you find the best investment property mortgage rates? Here’s a list of the best places to invest in along with the best banks providing the best mortgage rates:
- Florida: RealWealthNetwork highlighted four cities in Florida with good potential: Orlando, Tampa, Jacksonville (cost of living below the national average), and Cape Coral (26% rent growth over the last few years). Florida offers low prices (under $125,000), property tax, and insurance rates. With rising rental rates, property values, and zero state income tax, it’s a great investment option.
- Atlanta, Georgia: The Atlanta- Sandy Springs-Marietta metro area is one of the best housing markets to invest in for 2018, according to Forbes.
- Nashville, Tennessee: Nashville is a great city to invest in short-term rental properties according to Mashvisor’s investment property calculator.
According to Consumers Advocate, the top three banks providing the best investment property mortgage rates in these areas (and in most states across the US) are:
#1. Lending Tree: this is the number one choice, providing mortgage rates as low as 3.927% (for 15 year-fixed-rate mortgages).
#2. Quicken Loans: multiple loan options- purchase or refinance. It’s the largest online mortgage lender in the US and has award-winning customer service.
#3. J.G. Wentworth: low mortgage rates, no points and no hidden fees, and a wide variety of mortgage programs.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.