How to Buy a Rental Property: 5 Tips for First-Time Buyers

When it comes to making stable financial investments, purchasing a rental property ranks quite high on most people’s lists. An investment property can offer the chance to keep your money safe over a long period and can provide support and security for your family. Understanding how to buy a rental property is easy with the right lender by your side.

The team at TwinCity can help. As experts in the world of home loans, our concierge brokers provide you with the best rates, top service, and a smooth closing process. Whether you are buying a first home or a fifth, we have the experience to get the job done right.

The core steps in securing a loan for a rental property are similar to those for a primary residence. But there are other things to keep in mind that can be unique to this process. Here are five tips for first-time investment property buyers.

1. Pick a good location.

Location always matters in real estate and even more so for investment properties. This consideration is particularly important if you are planning to buy a short-term vacation rental property. You need to make sure that there is plenty of demand in the area where you are planning to buy. 

Spending some time on vacation rental sites such as VRBO or Home Away will help you gauge the demand in a particular area. If there are large numbers of rentals with a lot of availability, it may be a saturated market.

It is also a good idea to see what the popularity of a location looks like during the offseason. If you are planning to buy in a popular summer location, will you be able to make enough to carry you through the other months? Or vice versa?

For those looking to invest in a long-term residential property, the considerations will be slightly different but equally important. You not only need to consider the inventory, but also qualities such as:

  • Neighborhood information
  • Suitability of local schools 
  • Crime rates
  • Accessibility to public transit

When looking at a location for an investment property, be sure to find out if there are restrictions on rentals. Some homeowners’ associations, neighborhoods, and even towns have bylaws that limit or forbid rental properties. Make sure you verify that you will be able to use the place as a rental so that you do not have an unpleasant surprise after closing. 

2. Avoid a fixer-upper.

It can be tempting to grab a bargain on a property that needs a total overhaul. You may have a vision of selling it for millions when the time is right. With rental properties, however, you are best finding a home that requires minimal improvements, if any. 

Making small cosmetic updates can be a good use of your money if they don’t break the bank and are quick to complete. And sometimes, those properties have a great price tag, making it worth a little time and money to spruce them up. The goal when purchasing a rental property is to allow it to make you money as soon as possible. If you have to dump a lot of funds into it right away, you may not see a favorable return on your investment. 

3. Come to grips with expenses.

It can be easy to see an investment rental property as a fast, simple way to make some cash. You just subtract the mortgage amount from the rent and then go on a shopping spree, right? This isn’t quite how it works. You are responsible for all of the taxes, repairs, upgrades, and maintenance.

As a general guideline, you should expect at least 50% of your rental income to go back into the property in some form. In addition to the mortgage, your budget should cover all of the following costs, as they apply to your situation:

  • Capital expenses fund (new HVAC, windows, roof, etc.)
  • Property taxes
  • Property management fees
  • Utilities (for short-term rentals)
  • Insurance
  • Routine maintenance

In addition to ongoing expenses, the up-front costs to buy a rental property can be higher than you expect. Unlike for a primary residence, home loans for investment properties typically require 20% down. 

If you find a property in an excellent location, all of these expenses can be well worth it for your long-term wealth.

4. Try to buy below market value.

Those who routinely invest in real estate rental properties tend to follow one crucial guideline. Purchase a property that is available below the current market value. Grabbing a discount allows you to build equity quickly.

And work with your lender to find the most competitive interest rate. A broker will be able to serve you best. They can offer a wider variety of loan options and usually a better rate, as well.

5. Do your research.

When you consider how to buy a rental property, it’s great to get advice from multiple sources:

  • Your real estate agent
  • Your lender
  • Other landlords
  • Online experts

But none of these sources can be a substitute for doing your due diligence. Take time to understand what properties in your niche sell for, so you are ready if a great deal comes up. Get to know the area, the market trends, and the demand for rentals.

Tell your circle of contacts that you are looking for an investment property. You never know when they may be able to connect you with someone eager to sell. Putting in a little hard work from the beginning can mean that you are ready and waiting when a fantastic deal presents itself.

We Are Ready to Serve

Here at TwinCity Lending, we are dedicated to helping you. We can offer the guidance and advice you need to proceed successfully with an investment property purchase. As a concierge mortgage broker, we have all the tools necessary to get you the best loan package for your needs.

Get in touch today to have a chat with one of our experts and make your rental property dreams a reality.


Top 7 Home Improvements for Resale Value

One of the many reasons people choose to buy a home is the ability to sell that house to make a profit. Homeowners are not always sure of the best home improvements for resale, however. Home renovations and updates are time-consuming and can be expensive. So you need to make sure you know the best home improvement investments for you.

For starters, you can always look at current trends when trying to determine the best home improvements for resale. Those with cable television and streaming services can confirm that we are living in the golden age of home improvement. Homeowners interested in the best home upgrades have all kinds of inspiration surrounding them.

But the quest for quality home improvement ideas can almost feel like drinking from a firehose. Too much, too fast. Let the experts at TwinCity Lending help you narrow it down to seven of the best home improvement investments.

1. Garage Doors

Garage doors might not be quite as fun as shiplap in the bathroom or farmhouse tables in the kitchen. But even with the lack of glamour, garage doors are a sound investment.

If your home has garage doors that are visible from the street, replacing the doors can vastly increase its curb appeal. You will likely recoup about 98% of the cost of this project when you are ready to sell the home. There are many door and window styles, so you are sure to find something that enhances the look of your house.

2. The Kitchen

Homeowners who want to invest in the best home improvements for resale should consider a kitchen remodel. Even minor upgrades can pay big dividends.

The kitchen is the heart and soul of most homes, and it often serves as the family command center. From meal preparation to homework to entertaining, the kitchen meets a lot of needs.

Potential buyers typically have an updated kitchen high on their list of must-haves, so it is wise to get your space ship-shape. Homeowners usually recover about 80% of the cost of a minor remodel and about 60% of a major kitchen overhaul. 

Whether your kitchen remodel is major or minor, the decision is one of the best home improvement investments. A significant kitchen renovation is worth about $40,000 when you sell the property. A smaller upgrade can add between $15,000 and $20,000. And when you consider that homes with updated kitchens tend to sell quicker, a kitchen renovation is an excellent idea.

3. Deck Additions: Think Outside the Box

When looking at home improvements for resale, think about every part of the house, inside and out, front and back. A deck addition is an excellent way to increase your home’s resale value.

Decks are high-profile, and outdoor entertaining is extremely popular. The addition of a deck can add a resale value of around $10,000. Homeowners who opt to build a deck recoup up to 80% of the cost. If your home already has a deck, spending some money to give it a facelift is worth every penny.

4. Go Green: Save Money and the Planet

Installing energy-efficient appliances has multiple benefits. You can feel good about conserving energy, while also driving down your utility bills. In addition, your state may offer tax breaks to homeowners who install energy-efficient appliances.

Prospective buyers will appreciate your commitment to the environment. Many house hunters specifically look for homes with green touches, so your home will be able to stand out from the competition.

And appliances aren’t the only environmentally-friendly improvements. Consider installing new windows to help keep the house warm in the winter and cool during the summer. New windows can add about $11,000 to your home’s resale value, and have a recoup rate of around 75%. 

5. Make an Entrance 

In addition to decks and garage doors, another outside home feature that increases curb appeal is the entrance. Take a look at your front door and think about someone’s first impression. Would it appeal to a potential buyer? Is it dingy, dented, or out-of-date? 

Assess your front door to determine whether it needs a paint touch-up or maybe even a replacement. Front doors are one of the first things that house hunters notice, so this area is worth your attention. If you have a front porch, make sure it is in good repair and consider restaining or repainting to freshen it up. 

6. Make Every Side Your Good Side 

Damaged or worn siding will give prospective buyers an immediate bad impression. They are likely to view the home as a fixer-upper when shabby siding is on display. Siding replacement offers a high return on your investment since you will recapture about 75%. New siding is a worthwhile investment whether you plan to resell soon or not.

7. Bathroom Updates or Additions 

When it comes to the best home improvement investments, bathrooms can reign supreme when done correctly. For updates and renovations, the key is to make modest, good-quality changes. 

A $70,000 bathroom remodel is unlikely to pay off in the long run. But spending a fraction of that to update things like the fixtures, flooring, and vanity can give you a substantial return when you sell. 

One time that it does pay to tackle the bathroom is if you add a new one altogether. Taking a home from a one-bathroom listing to a two-bathroom listing adds a significant amount to the resale value. It also makes it much more likely that your home will sell fast.

Ready, Set, Go!

If you are ready to sell your home and move into something new, reach out to the concierge brokers at TwinCity. We are on your side throughout the whole process.

And for help financing your home improvement projects, contact us for information on a cash-out refinance. One regret homeowners often face is that they wait until they are selling to make improvements. Why not do them now so that you can enjoy them for a while?

TwinCity Lending offers competitive interest rates for home loans, home equity packages, and refinance options. Our lending professionals can help you assess the right tool for you.


How Do You Get a Home Loan for a Fixer-Upper?

Purchasing a home of their own is a dream for many people. But the high price of property often means that it can take a long time and a lot of saving to own a home. To save money, many prospective buyers decide to look for a property that needs some TLC. But getting a home loan for a fixer-upper has some nuances to keep in mind.

Securing a mortgage for a fixer-upper is a great way to get into a property that you can afford. Buying a home that needs a little attention is also the perfect way to make the home uniquely yours as you do updates, upgrades, and renovations.

For any home loan needs, the expert team at TwinCity Lending is here to help. Our concierge service ensures you get the best rates, service, and closing process.

Why Choose A Fixer-Upper?

Choosing a house that requires work can seem daunting, but it can also offer a host of benefits:

  • A Lower Price – If you have your heart set on a particular location, but the prices are out of your range, then a fixer-upper could be the perfect solution. Due to their less-than-perfect state, they often carry prices below market rate. The lower price point makes them a fantastic option. You could find yourself living in your dream location for a fraction of the cost.
  • An Older Home – In general, fixer-uppers tend to be older properties. This is perfect if you are looking for a space that is bursting with character and original items. Rather than designing a house that looks like all of its neighbors, you can restore the period features such as windows, cornices, and super-high ceilings. It is exciting to bring charm and majesty back to a faded beauty.
  • A Chance to Make It Your Own One of the significant appeals of a fixer-upper is the opportunity to put your spin on a property, and make it feel like your home. This chance is particularly exciting if you are planning to stay for the long term. You can design your perfect dream home right from the outset.  

What Are Your Options?

When deciding how to get a home loan for a fixer-upper, many buyers opt for a renovation loan. This type of loan package is beneficial when you want to buy a property that needs some work. It allows you to finance the purchase of the home, as well as the essential improvements required into one loan. You only have one monthly payment to cover the mortgage and renovations.

This streamlined home loan package is an ideal way to get started on homeownership without a considerable outlay of cash.  Some of the most popular renovation loan options include:

  • FHA 203(k): This choice comes through the Federal Housing Association and is accessible to those with a lower income and credit score. The FHA 204(k) is suitable for most home improvement projects. You can use the funds to carry out both structural and cosmetic renovations. Even better, work can begin as soon as you close.                                                                                                                                               

It is important to note that these loans are only suitable for primary residences. You will not be able to submit an application for renovations on a rental property or second home. There are also limitations on what you can do with the funds. Luxuries such as a pool or extreme landscaping do not qualify for using the loan money.

There are two types of 203(k) loans: limited and standard. The limited version is available to use for any renovations up to $35,000, as long as they don’t require major structural work.                                                                                                   

The standard option covers projects with budgets over $25,000 or where significant structural improvements are necessary. For this route, you must work with a HUD consultant. They will help the homeowner analyze bids and oversee all inspections.

  • VA Renovation loan: The loans offered by the Department of Veterans Affairs went through a recent update. Now they are eligible for use in the purchase and renovation of a home. Note that for this type of loan, you will need a VA-approved contractor, and there may be a construction fee attached to the loan.
  • Fannie Mae HomeStyle: A HomeStyle loan requires a higher credit score than the FHA 203(k) loans. But almost any home improvement is eligible, including landscaping or even installing a pool. With Fannie Mae backing, this loan is a popular choice if you are planning a total luxury overhaul of a property.
  • CHOICERenovation Loan: Guaranteed by Freddie Mac, this option carries a lot of benefits. It is ideal for those seeking a lower-cost home to purchase since it has a low down-payment requirement. Borrowers can even earn a down payment by making repairs themselves before closing.                                                                                     

A renovation loan is a perfect way to ensure that you can meet all your financial obligations while still working on developing and building your dream home.

How Do I Get Started On a Home Loan for a Fixer-Upper?

If you decide to head down this route, the first step is to talk with your lender. It is best to work with a mortgage broker rather than a loan officer who works with only one institution. The broker will be able to offer you more options for your financing needs. They will walk you through your options and help you determine the best loan for your needs. 

Once you have a plan with your lender, it’s time to go house hunting. Be sure you have an experienced real estate agent who can help you through this process. And unless you plan to do the work yourself, it’s a good idea to have a contractor available to give you some advice and input as well. 

When you are in contract on a property, you will likely need to obtain estimates for the work to be done. Sometimes this information is necessary to close the transaction. 

TwinCity for All Your Lending Needs

No matter what stage of home buying you are in, the friendly staff at TwinCity Lending is here for you. We can help you navigate FHA and VA loans, as well as home equity and jumbo loan packages. Reach out today to get started.