Jun 15, 2010

Selecting a Mortgage that Maximizes Profits

The state of the housing market makes it an excellent time to consider jumping in as an international real estate investor. Understanding the financing process will earn you big returns. Read on for steps you can take to begin.
Why Invest?
Interest rates have been lowered to combat the economic issues within the region. As the real estate market contracts, the price of such investment has fallen, which makes the opportunity to invest in a second home appealing.

Creative Financing
After investing in real estate, a major factor in realizing a return is ensuring that the correct financing is in place. One must not consider investment in real estate a standard wholesale and markup operation, but rather should begin the investment with a series of questions to identify goals. You must first determine if you are seeking short-term or long-term profit represented in annuity.

If you are looking for a short-term profit, which would involve purchasing the property and selling it following renovations or changes that increase its value, consider an adjustable mortgage with a very low temporary interest rate. Keep in mind, though, that you must sell the property before the mortgage resets which is a variable length between two and five years. If you do this, you can maximize your profits by paying only the interest and transferring responsibility for the principal to the buyer.

For longer-term real estate investments like a rental property, a fixed mortgage will be better as it allows you to plan your cash flow accordingly.

Many people who invest in real estate may want to quickly pay off the debt, but remember: you are using rental income to help subsidize the mortgage payment. If you truly have a long-term horizon, you can rest easier knowing that someone else is paying more of the interest and principal each month than you. For rental properties or investment real estate, make sure you leverage all of the tax benefits of depreciation and valid expenses.

Current Post: 1 of 3 in International Investment Series

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