Income property financing is probably most involved financing youíll ever
seek. The income means that making payments should be easier, making lenders
more likely to finance. But the potential problems with this type of property
make lenders look closely at the property deal, and at your ability to manage
the property before approving income property financing.
Before you approach a lender for income property financing, take a careful
look at the property. Is it likely to pay for itself? Are there repairs needed
to get it running to full potential? Do you know anything about this kind of
One way you can convince a lender that financing income property for you is a
good risk is to create a business plan. If you donít know how to create a
professional business plan, look for online sources on the topic. Your plan
should include expenses and revenue in the propertyís current condition, along
with any changes you plan to make if you are approved for income property
financing. Then put together projections for income and expenses over the next
year, two years and five years. Longer projections should be made if itís
practical to do so. Presenting a business plan along with your application for
income property financing will alert the lender that this isnít a passing idea,
but that youíve already put thought and effort into the project.
An appraisal and inspection can also help you gather information that will
help in your quest for income property financing. Remember that an appraisal
and/or property inspection may be required before a lender grants the income
property financing and you may be paying for the service twice if the lender
wants to hire their own professionals. You have to decide whether itís worth the
cost, but take a look at some of the information you can gather from these
An appraiser who is familiar with valuing income property will not only tell
you what the building and land are worth, but will give you the value of the
property considering its income producing capacity. That can give you an
important heads up about the asking price and what you should be willing to pay,
as well as what a lender is likely to allow if the income property financing is
A property inspector will also provide some important information. Mechanical
and electrical systems will usually be part of an inspectorís service. Youíll
know whether the air conditioning and heating units are in good working order,
and probably be alerted to things such as the fact that the systems are old.
Termite damage, structural issues and even code violations (important if the
property is an apartment building) may be part of the inspectorís report. Armed
with this information, youíll be able to create a realistic business plan to
present to a lender when you ask for income property financing.
Income property financing requires more effort than most types of financing.
You may be called on to present additional information before your income
property financing is approved, including records from the previous owner. Just
remember the reason youíre searching for the income property financing in the
first place Ė the potential this particular property deal is offering.