After successfully entering the landlord business with a rental property, are you ready to grow your business by adding another? This critical juncture involves many new challenges, and one of the first will be securing new financing for additional rental properties. How can you ensure that you're able to qualify for funding and take this leap? Here are a few tips any landlord can apply.
1. Be a Strong Borrower.
Getting a mortgage for a single house can be relatively easy, but funding an investment property is often harder. Harder still will be getting another rental loan. Improve your chances, then, by making yourself the best candidate you can be. Boost your credit score, put more liquid cash into reserves, and make sure your monthly budget is as flexible as possible.
2. Look for Consolidation.
Because it will be more complicated to get multiple rental property loans, consider consolidating both the original property loan and the new one into one larger loan. This move also allows you to restructure your loan if interest rates or terms have become more favorable since you took out the loan.
3. Buy Multiple Unit Properties.
Becoming a multi-unit landlord doesn't necessarily mean you must buy a bunch of different properties. Instead, why not buy a single property with two, three, or more individual units you can rent out? Multifamily housing simplifies much of the transition from a single property to being a larger landlord, and you can cover all the units with one mortgage loan.
4. Consider Commercial.
Commercial investment properties are a different type of rental business than residential and single-family home investments. The loan requirements are also different. Because you usually set up a business to operate a commercial rental property, you may find that securing a loan depends on many different factors and doesn't conflict with your current mortgage obligations.
5. Have a Business Plan.
As you move further into a landlord business, you'll need to demonstrate that you have a workable, reliable, and historically well-performing income strategy. Take the time to write out a business plan that shows how you will pay the new loan, realistic rental income projections, and contingency plans. If they're on the fence, lenders can be swayed by a solid business opportunity.
Want to know more about seeking and qualifying for another rental property loan? Start by meeting with a lender in your state today. With their expertise and your diligence, you'll soon be on the road to even greater real estate investment success.