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Multiple residential properties in the US

To Rent or To Buy? Important Financial Considerations When Buying a Residential Property

Even with deteriorating financial conditions in the US, the American Dream is still alive. However, the increasing prices in the housing market are making it challenging for many people to get their hands on their dream home.

In such a situation, you should carefully analyze all the financial factors to invest your money adequately. Let’s find out what financial aspects you should consider before buying a residential property in the US.

Check Your Budget

Before closing a real estate deal, ask yourself whether you’ve got the budget to invest in residential property or not. Calculate the total amount you can invest in the property. Once you’ve decided on an investment amount, look for properties that fall in your budget and start contacting the sellers.

But today, even if you don’t have the funds to buy a house, you can use a wide variety of financing options to get your hands on the property you like.

Two individuals analyzing their budget

Take A Look At Your Cash Flow

Do you think paying the residential property’s market value is enough?

You’ll have to handle different expenses in a real estate deal, and if you aren’t prepared for it, you can face many financial problems.

Want your real estate deal to complete smoothly? Look at your monthly cash flow and prepare for the additional costs.

We’ve listed some of the external costs you should consider beforehand to prevent financial issues:

  • Loan application fees: Whether you’re taking a loan from a bank or a private lender, you’ll have to pay the mortgage application fee. Choosing an inexperienced lender can increase your costs and become a burden on your cash flow. The application charges can vary from lender to lender. We recommend you opt for a reputable private lender who offers minimal application fees and no junk fees or prepay penalties.
  • Home Inspection Costs: Purchasing a residential property without extensive inspection is a rookie mistake you should avoid. House inspection can be expensive, but it can help you identify the loopholes in the deal and assist you in analyzing the repair costs. If the inspection report states that the property requires a lot of repairs, you should bail out of that deal and look for a better house. You should check every corner of the house, from the plumbing to the infrastructure, to ensure you’re investing in the right property.

An individual inspecting a kitchen

  • Closing costs: Every real estate deal requires a plethora of paperwork completed at a cost. The buyer often has to pay the closing costs, which may include an appraisal, credit report, loan origination, deed recording, and other relevant fees.

Check the Resale Value

When you’re investing in a residential property, you’d want its value to increase exponentially. You would never want to buy a property that’s expected to decrease in value. This is why it’s crucial to check the resale value of your residential property. You can get in touch with experienced private lenders who can help you conduct rigorous financial analysis and predict your property’s resale value.

Your property’s value also depends on the neighborhood. If you want to go the extra mile, check out upcoming projects in your area, which can boost your property’s value.

Crime rates in your area can also affect your property’s value. Do you know eight million people in America were pushed below the poverty line because of the pandemic? The deteriorating financial condition coupled with the increasing unemployment rate has led to an increased crime rate. If the residential property you select is in an unsafe area, you can expect the resale value to go down drastically.

 A financial expert calculating a home’s resale value

Get Minimal Interest Rates

If you’re taking a loan to purchase the residential property you’ve been eyeing for a while, the interest payments can become a burden on your bank balance. You might not be aware, but interest rates are likely to increase because of the Ukraine-Russia crisis. This is why you should purchase residential property as soon as possible to avoid the interest rate hike.

Luckily, private lenders are flexible with interest rates payments. Many reputable private money lenders offer hard money loan deals with interest rates as low as 4.5%. While banks follow a strict loan application process, private lenders can make a tailor-made loan deal for you.

If you fail to provide timely interest payments, banks can make your life miserable and seize your assets in the blink of an eye. Unlike traditional banks, you can renegotiate lending terms with private lenders to make the loan repayment easier than before.

Always Consider Insurance And Tax Payments

No one wants their brand-new house to incur damages, right? But you can’t do anything to stop natural disasters. If you want to financially protect your residential property from significant damage, you should opt for homeowner insurance. Yes, it’s an added burden on your budget, but it’ll help you minimize the repair costs.

You’ll also have to pay property taxes on your residential property. Currently, the tax rate is 1.1% of your home’s average value, but this can change according to government regulations. We recommend you stay updated with the changes in government rules to ensure you know more about tax payments.

A house with a damaged roof

Inspect Your Credit History

Are you opting for conventional financing? If so, you should frequently check your credit history. Undoubtedly, credit scores have taken a hit in 2020/21, and your low credit scores can make it challenging for you to acquire bank loans for a residential property deal.

Finding it difficult to improve your credit score? Here are some tips that can help you:

  • Frequently inspect your credit report
  • Make timely bill payments
  • Minimize credit utilization
  • Consolidate your debt payments

Improving your credit score is not only challenging but can be time-consuming too. You’ll need expert guidance and extensive financial knowledge to enhance your credit score. If you don’t have the time to improve your credit history, connect with private hard money lenders who use your existing properties as collateral to offer world-class home loan deals.

Rent vs. Buy: What Is Better?

Once you’ve analyzed your financial condition rigorously, it’s time to decide whether you should rent out or buy a property. While renting out a property gives you the freedom to change houses as per your liking and minimizes your responsibility, buying a property in today’s booming real estate market is still the perfect option for you to amplify your wealth.

Yes, purchasing a property in the US can be costly but think of it as a one-time investment that’ll bear fruits in the long run. Some of the benefits of purchasing a residential property are listed below:

Increasing Property Value

It’s no secret that buying a property today can financially secure the future for you and your loved ones. Yes, investing in real estate might seem like a burden, but its increasing value can make you rich in the future. This is why many experts rate the real estate market as one of the top investment opportunities for American citizens.

Tax Benefits

Did you know the Biden government has announced a 3.6 trillion dollar tax hike on US citizens? Amidst the challenging economic condition, nobody wants to pay more taxes. So, what do you do? Tax evasion is not an option as it can have financial and legal complications.

Luckily, you can get massive tax benefits if you purchase properties in the US. You can deduct monthly interest and mortgage insurance payments from your tax returns and reduce your tax bill.

Stable Monthly Income

Buying a residential property doesn’t mean you’re bound to live in it. You can rent it out to get a stable monthly income. It’s not a surprise that rent prices have increased by thirty percent in the US. You can use the high rent rates to get the extra buck and enhance your monthly rental income. This can help you and your family make a predictable budget and get your financial condition back on track.

Freedom To Make Changes In The Residential Property

If you want to build the perfect house from scratch, consider buying a residential property. When you’re living as a tenant, you need to adhere to the rules and regulations set by the landlord. As a tenant, you won’t have the freedom to design the property accordingly, which is why it’s better to purchase a property.

How To Buy A Residential Property In 2022?

We understand that buying a property in 2022 will be difficult for many families in the US because of financial problems. This is why it’s better to opt for financing options to complete your real estate deal smoothly. You can either go for banks or private lenders, but which one is better? We’re glad you asked!

While banks offer conventional financing methods, their loan application process can take a lifetime. While you wait for your loan approval, your dream property can slip right out of your hands.

A better alternative for you is to collaborate with private money lenders and get a home loan dealon your timeline. Private lenders don’t require lengthy requirements and simplify the loan acquisition process. Many reputed money lenders have teams of financial experts who can conduct a rigorous underwriting process and approve your loan application within twenty-four hours.

Once you’ve selected a private money lender, it’s time to choose the loan deal that fits your needs. Here are some types of financing you can use to buy a residential property:

  • Fix & Flip Financing: Want to make a quick buck in the real estate market? You should use fix & flip financing from private lenders. With fix & flip, you can purchase a property, renovate it, and sell it off to get a hefty profit in no time. Experts estimate that home prices will increase by 12% in 2022, making it a perfect opportunity for you to get a high return on your investment through fix & flip financing.
  • Hard Money Construction Loans: Purchasing a residential plot gives you the freedom to build your dream property as per your liking. But with increasing construction material prices, your construction project can be costly and turn into a financial nightmare. This is why you should opt for construction financing from private lenders to prevent financial hassles in the future.

  • Multi-family Bridge Loan: If you’re looking to enhance your real estate portfolio, you should get multi-family bridge loans from a reputable hard money lender. Bridge loans are a top-class alternative for you to get quick financing for your real estate projects.

Selecting the right home loan deal isn’t an easy task, especially if you don’t have the technical financial and real estate knowledge. We recommend you take assistance from private lenders who can guide you at every step of the process.

A private money lender counting dollars

Private Lenders Available In The US To Help You Purchase A Residential Property

Are you looking for private lenders for a hard money loan deal? You’ve made the right decision! You should visit Insula Capital Group to get home loan deals with minimal interest rates. We’ve been providing home loan deals to clients in the US for over thirty years.

Our hard money loans require minimal documentation and have no prepay penalties. US clients prefer to work with us because of our several financing options, including fix and flip financing, bridge loans, residential rental program, and hard money construction loans.

Get in touch with our representatives for more details on our home loan deals.