Investing in investment property with only 10% down payment in the US has become an increasingly popular strategy for investors to enter the real estate market. By putting down less capital upfront, investors can leverage borrowed money to purchase properties and expand their portfolios. However, there are several key factors to consider when pursuing this route. Throughout this article, we will explore prerequisites for financing, property selection criteria, cash flow management tactics, and exit strategies when investing in investment property with 10 percent down.
Securing financing with 10 percent down payment
The most difficult hurdle when investing in investment property with 10 percent down is obtaining financing. Most lenders require 20-25 percent down payments on investment mortgages to mitigate their risk. However, a few niche lenders like Angel Oak will offer investment property loans with only 10 percent down to qualified borrowers who have strong credit scores and ample cash reserves. It’s critical to research lenders and prepare a solid loan application package to improve chances for approval.
Cash flow positive properties enable loan repayment
When leverage is high with only 10 percent investor capital in an investment property, it is essential to target cash flow positive properties. This means rental income exceeds all expenses like mortgage payments, taxes, insurance, property management fees, maintenance and others. By verifying positive cash flow, investors ensure sufficient monthly income to cover debt obligations over the long run.
Consider future appreciation and exit strategy
While cash flow pays the bills today, future appreciation unlocks profits down the road. Savvy investors target investment property in areas primed for value growth, whether due to improving economic conditions or new infrastructure development. Combining cash flow and appreciation makes these assets more sellable when the time comes. Having an exit strategy from the start enables selling at peak price to maximize investment returns.
In summary, investors can successfully purchase investment property with 10 percent down when they obtain specialized financing, target cash flowing assets, and consider future exit strategy. However, this high-leverage approach has risks if property values decline. By planning carefully and managing finances responsibly, investors can leverage other people’s money to secure profits.