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Two Things to Take into Consideration when Getting Property Loans

By Crowin Smith Subscribe to RSS | January 10th 2012 | Views:

Truth be told, many of those who invest in real estate are failing to meet their monthly obligations for their loans. We’re not just talking about some people. We’re talking about people who initially have outstanding real estate investments. The answer to this puzzling event comes in the form of two factors that play a crucial role in the viability of any real estate investment.

Mortgage Rates

One reason why investing on real estate is better than other types of investment is the quick and easy access to information. Anyone can get the information they want regarding property loans on TV, radio, print media and the World Wide Web. For those who have no idea about the tenets of macro-economics, one of the key ideas that relate to investing in real estate is the influence of the movements of the mortgage rates. High mortgage rates can eat away any investor’s profit and disrupt the cashflow. This situation highlights the importance of preparing for possible mortgage rate increase in the future.

Before deciding to venture in real estate, be sure to keep in consideration the trend in mortgage rates, possible penalties, as well as the option to avail of a refinancing mortgage. You can get a lot of information about these things on newspapers, magazines, and most especially the internet.

Meanwhile, one particular strategy that can be adapted in real estate investing is purchasing the property ‘subject to the current mortgage’ should the loan be locked in an affordable mortgage rate. Such strategy will be very effective during times when mortgage rates are on the rise, considering that any minor increase in mortgage rates can lead to huge leaps in mortgage payment. Doing some research and minor calculations can tell you where things are heading, allowing you to make preparatory measures to avoid financial loss.

Rental Income

The other factor to consider is rental income. The most common indicator here is the return of invest (ROI), which is total rental amount per year as a percentage of the property’s general price. Most people are actually able to settle their investment loans within a decade by using the entire rental proceeds to pay the mortgage.

Investment return is not the sole basis to determine rental income. You should also analyze future rental income aside from the past and present. To successfully come up with a future projection, you may analyze the country’s property cycle together with other economic factors that could influence the demand for properties.

Understanding these two things can work wonders for you and your investment property loans. One of the keys to any endeavor is to gain as much information as you can to understand how certain actions can make or break the outcome that you desire.

Crowin Smith - About Author:
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