There are numerous factors to consider before investing in a new property or obtaining financing. While each investor may have their own preference, it’s essential to weigh the pros and cons of each method of purchasing investment property. Both approaches have their downsides, but they can also provide benefits to investors.
Join us as we explore the advantages and disadvantages of financing your investment property in Belleville.
Pros
Time
For novice investors, financing your investment property in Belleville can provide you with the opportunity to build equity and start developing your real estate portfolio earlier rather than later. In the real estate industry, the advantages of obtaining a mortgage, even if you don’t have the funds, far outweigh the missed chances and years of potential appreciation on the investment property if you wait until you have saved enough money to begin.
Leverage
Financing your investment property in Belleville can result in improved cash flow. Assuming the risk of a mortgage allows you to enjoy higher cash-on-cash returns, which represents cash flow based on the actual cash invested in a property, calculated on a pre-tax basis.
More Assets
By utilizing financing and using other people’s money to invest in properties in Belleville, you can expand your portfolio and diversify your holdings to enhance your financial security. Furthermore, owning multiple properties in diverse areas can help you weather a downturn in a particular sector more easily.
Return on Equity
Acquiring financing for your investment property in Belleville can also increase your returns as the property appreciates and you pay down the debt.
Taxes
Financing your investment property in Belleville offers another advantage through the depreciation of the property’s total value when you carry a mortgage. This can be highly beneficial for your tax returns. Additionally, you can claim deductions on the mortgage interest.
Depreciation
By financing your investment property in Belleville, you can add a layer of protection against depreciation. If the property’s value decreases, you will only lose your cash equity rather than the entire investment.
Cons
Delays
Financing your investment property in Belleville may put you at a disadvantage when competing against other buyers who are offering all-cash deals. It’s common for sellers to prefer cash transactions, which offer a quicker path to closing and do not require lender approval, particularly in the fast-paced real estate market we are currently experiencing.
Less Cash Flow
When you finance your investment property in Belleville, your cash flow can be impacted by mortgage payments and interest. While other expenses can accumulate, your mortgage and loan interest will typically consume the largest portion of your rental income.
Qualifying
Establishing your creditworthiness, saving for a down payment, and qualifying for financing your investment property in Belleville can be challenging accomplishments. Despite your best efforts, you may need to explore alternative financing options. Consulting with seasoned investors, such as the experts at Cardinal Creek Properties, can assist you in overcoming any obstacles you encounter when seeking financing or building your credit and savings.
Credit Risk
When you finance your investment property in Belleville, extended problems with rent payments from tenants or vacancies can become significant issues. Carrying a mortgage increases the potential for foreclosure and harm to your creditworthiness.
If you’re considering financing your investment property in Belleville and are ready to make a purchase, the experienced investors at Cardinal Creek Properties are here to answer any questions or concerns you may have. Our primary focus is on you, and we will take the time to listen to your specific circumstances and provide guidance on the steps that will best help you achieve your investment goals. At Cardinal Creek Properties, our full-service team can assist you in finding the right investment property, managing it, and handling all the essential details in between. Be sure to inquire about our current inventory of the best investment properties available in Belleville. To learn more, please contact Cardinal Creek Properties at (314) 467-8137.