Are investment properties in Michigan worth it?

Here’s the short answer: Yes!

Investment homes in Michigan are an incredible tool for building wealth and diversifying your investment portfolio. All it takes is some time, savings, and planning to purchase a home as an investor.

How do you qualify for an investment home loan?

To quality for an investment home loan, you’ll need to prove your income and financial stability, while also making sure you can afford both your primary property and investment purchase.

Interested in purchasing an investment home? Our loan experts are here to walk you through the process and to see what your options are.

 

What are the benefits of an investment property in Michigan?

Investments were made to grow! With a little work, an investment property can help you build wealth over the long-haul.

Home equity on investment properties

Your equity is calculated by the value of your home, minus your remaining loan balance. As you pay down your loan, you’ll own a greater financial “portion” of your home (your equity).

Traditionally, home values increase over time— that means your home will likely be worth more than the amount you paid for it! This could lead to noticeable wealth-building over many years. Instead of investing your excess capital in the stock market, consider purchasing real estate to diversify your portfolio.

With great equity comes great opportunity. Whether you choose to cash out your equity with a refinance to remodel or re-invest, or keep in a paid-off home, the equity is yours to keep!

Rental properties

Use your property as a business! Maybe you’ll rent out the garage for storage or rent the home to a local family or tourists. Either way, your property might be able to generate rental revenue, especially for Grand Rapids investors.

“House Hacking” is another common trick, which may allow you to call your “investment” home a primary residence! Normally, house hacking involves the purchase of a multi-family home (a house with multiple units), and you (the borrower) live in one of the units! This allows you to claim the “investment” property as your primary residence, which decreases your down payment and (potentially) your tax liability.

Love it or list it

If you’re a handyman or well-versed in remodeling, you may consider purchasing a home in need of repair and re-selling it (after your awesome work is done) for a profit! These home purchases take dedication and commitment. Some may need a special renovation mortgage!

 

How much should you put down on an investment property in Michigan?

It is required to put down a minimum 15on homes that are investment properties.

Why? First, there are no government loans are available for secondary residences— only privately backed and funded loans.

Second, investment homes are traditionally at a much higher risk of default than primary residences. This requires lenders to tighten restrictions on loan eligibility.

Need a source for your 15% down payment? Your primary home might be the key (pun intended)!

 

Can I use equity from my home to buy an investment property?

Yes! Many homeowners choose to use a cash-out refinance on their primary home as their source of funds.

After you’ve owned your home for several years, you’ll have built respectable equity by paying down your loan. Your home’s value may have even increased during that time! By using a refinance, you’ll be able to use that equity as (literal) cash in your next home purchase.

Not only is this a common way to purchase an investment home, but it might also be to your advantage to refinance! Depending on the original loan terms on your current home, you may be able to tap into your equity and push the equity forward without changing the monthly payment on your current home.

Talk to a Loan Officer to see if this is a possibility for you!

 

What’s the difference between a second home and an investment property?

There are plenty of similarities between Michigan investment and vacation homes— both help you build equity, and both can be a tool to leverage your cash.

In terms of loan differences— they’re almost identical! Neither vacation homes or investment homes have the same tax advantages as your primary residence, while both require a larger minimum down payment with a conventional home loan in Michigan.

 

How to get an investment property in Michigan?

Our Loan Officers are experts on investment homes in Michigan. Get in contact with one of our experts to start the process!

 

Frequently Asked Questions

How much do you have to put down on investment property in Michigan?

In general, investment properties require at least 15% of the purchase price as a down payment. There are many factors that can come into play including the number of units, as well as debt ratios and assets.

Can you use a residential mortgage for an investment property?

Yes! Conventional loans are one of the only loan types available for investment home purchases.

Where can I source my down payment?

You can obtain your down payment from multiple locations (feel free to pick and choose). Those include cash savings, investment accounts, cash-out refinances, and more. Gift funds are not allowed for investment properties.