Although the global financial downturn saw the price of property tumble dramatically in many countries, real estate remains a solid investment, especially over the long term. Canny investors saw reduced property prices as an opportunity to buy real estate at value prices, with the virtual certainty that prices would recover.

The biggest stumbling block was the much tighter lending requirements introduced during the crisis. Prior to the crisis, banks and other lenders were happy to give 100% loans, and many were agreeable to lend even more than 100%. In the current climate, it is almost impossible to get a real estate investor loan to cover the entire purchase price.

Most lenders will offer lower mortgages to those who want to buy property for investment purposes than they would for those borrowing to buy a home. That means that someone looking for a real estate investor loan has to come up with a bigger down payment.

The minimum percentage down payment required for investment purchases varies from one institution to the next, with many of them capping their loans at 50% of the purchase price. Investors who can make a down payment of more than 50% will find it easier to get a loan.

The tighter regulations also mean that those with low credit scores will struggle to raise investment finance. Moreover, those with low credit scores are likely to have to pay higher interest rates. Any prospective investor should try to improve his or her credit score before attempting to take out an investor mortgage.

Because investment loans are almost always to be repaid from the rental fees from the purchased properties, many lenders now insist that borrowers have sufficient reserves to meet mortgage payments for several months. This is to guard against borrowers defaulting because they are unable to find tenants.

Preparing a loan application
If you want to take out a real estate investor loan, and assuming that you can come up with the cash you need for a down payment and reserves, and that your credit score is acceptable, you still need to prepare your loan application to maximize your chances of being accepted.

Investor loans are essentially business loans, and you need to have a business-like approach when you ask banks to lend you money. You must be able to convince them that you can successfully run the business. If you approach a bank for a loan and you do not have a solid business plan, you will almost certainly be refused.

You need to be able to present realistic forecasts of the income your investment property will generate. That means you have to research rental rates for similar properties in the area that your property investment is located. Alternatively, if you plan to remodel the property with the intention of selling it on quickly, you must have details of the remodel, and a professional valuation of how much the remodeled property can be expected to sell for.

If the property you plan to buy has sitting tenants that you will inherit following the purchase, you should obtain copies of their current leases. You should also find out from the vendor whether all existing tenants are up to date with their rent. If one or more existing tenants are in default, that can hinder your chances of getting a loan.

Hire an accountant
It is good business practice to hire an accountant to help with your loan application. Accountants will be able to produce professional looking applications, and they can ensure that all relevant documentation, facts and figures are included. They can also help you to determine if your planned business is viable.

Once you start deriving income from your business investment, your tax situation changes, and this is yet another area where using an accountant can prove invaluable. An accountant will be able to maximize the expenses you can validly claim, so that you do not overpay. More importantly, an accountant can make sure you do not underpay, with the risk of facing heavy penalties or even imprisonment.