Sara Ibarra, Elevations Credit Union

Have you thought about owning an investment property? The return can be lucrative, but it’s important to understand the financial and time commitments a rental entails. Before you hand over the down payment, here are three questions to consider.

Are you ready for this?

Being a landlord is big deal. Purchasing and managing a rental property should run like a business. Prior to taking the plunge, consider all of the moving pieces. For example, make sure you’re equipped to treat the property like a part-time job. Tenants will call you with home issues, and you need to be ready to fix problems at the drop of a hat. Be prepared to put in many hours as you learn the ins and outs of property management.

How much will you need to borrow?

If you’re ready to manage a rental, your next step is to figure out how to make your investment property a reality. Start by chatting with a mortgage professional to learn more about loan options and interest rates. You’ll want to come out of the conversation with a clear understanding of what you qualify for. This will not only narrow down your home search but will also give you a clear grasp of your borrowing position. This is important because you never want your monthly payments to be higher than expected. After all, the goal is to make a profit off of the future property.

One surefire way to quality for a better rate is to put down 25 percent. If this seems like a lot of money, keep in mind that in most instances you’ll need to put at least 20 percent down to secure traditional financing anyway. This is because obtaining an investment property loan is harder than getting one for your personal home. Be prepared to hand over a significant amount of documentation on your finances and background to your lender.

What location is best?

It will be very important to have a team of experts on your side as you find your property. Chat with real estate professionals, investors and mortgage specialists to get to know your market. They’ll have information on property taxes, trends and other neighborhood statistics. You’ll also need to do a bit of your own research while keeping future tenants in mind. What would they look for in a community? Good school districts, low crime rates, parks and a family-friendly atmosphere? Or will they desire an area with nightlife, lively parks, coffee shops and restaurants? Location will be a key consideration during the buying process.

For more on buying an investment property – including how to estimate your potential return – visit the Elevations blog at

By Sara Ibarra, Elevations Credit Union. Sara is a Mortgage Loan Originator at Elevations Credit Union in Boulder. If you have questions regarding mortgages, please call 303.402.5456 or e-mail NMLS# 810243.