With home prices and interest rates at historical lows, now is the ideal time to at least be looking into your options with regard to purchasing an investment property.
Whatever your intent, your best bet is to start by doing two things. First, sit down and figure out what your goals are in purchasing a property, both short and long term. Second, figure out if it makes sense on paper.
A good real estate agent or appraiser should be able to help in determining property values in a given location, with specific attributes such as venue, square footage and number of bedrooms, and what those properties would bear in a rental market as well.
Looking at foreclosures, short sales and bank-owned real estate is a good place to start looking for properties, as they are often below market value. Keep in mind that they may need a bit of work.
Financing an investment property is similar to financing a primary residence, but the rates are higher as are the reserve requirements.
Also, investment properties are financed primarily by conventional loans, as the Federal Housing Administration lends only on homes where the buyer intends to live, with the exception of multiunit properties where the buyer plans on living in one of the units.
Plan on putting 25% to 30% down, and have six months worth of assets in the bank with which to make the payments. This is a bit steep, but lenders want to know that you are committed to making it work.