Purchasing An Investment Property: How To Calculate Your Payment

As a frequent traveler for work and for play, I’ve been lucky enough to visit some really great destinations, and while we’re mostly traveling to hike, we do get to spend a lot of nights in hotels and rental properties. Over the years, we’ve certainly learned what makes for a rental property that works versus one we can’t wait to leave.

With that in mind, my wife and I have started to consider purchasing a rental property for our own use and to rent out when we aren’t using it. Naturally this sort of decision creates more and more questions with some answers that aren’t so easy to find.

Up first is of course location, location and location. After all, if your property isn’t near a destination of some sort, then it’s not likely to have consistent rentals. Some of our favorite locations are towns near National and State Parks. Even more desirable are locations that don’t already have a lot of available accommodations and finally, be sure to investigate locations that are active in both summer and winter. If your rental property is only viable to rent a few months out of the year, you are likely going to not be able to rent it out consistently through the year.

Once we found a few locations we liked, of course the next questions are, how much will my monthly mortgage payment be?, and can I afford it? With that in mind I found a really good mortgage calculator that allowed me to compare multiple loan scenarios to find not only my likely payment amount, but also make valuable comparisons of interest rates and down payment amounts. The calculator also allows you to map out your repayment chart and graph the reduction of the mortgage over the term of the loan. This really gave us the confidence we needed to move forward.

Once equipped with some solid financial figures, we did some more research on where to buy an investment property and how the global Covid pandemic would affect our purchase and rental capability. I also wanted to follow up with VRBO and Airbnb to see if they had any insight on managing a property you don’t live in or live near. This gave us some really good insight that when combined with our mortgage calculations, made for a really complete picture of what to expect.

As of today, we’ve narrowed our search down to about 5 locations, all of which are in close proximity to outdoor activities that are busy year-round, and all of which have very few available accommodations for rent…and while I won’t details these locations right now, I will follow up with future articles as we progress so you can follow the entire process

Overall, while we realize that location is a really critical decision in the process, there’s no sense even looking at locations until you can calculate your payments and make sure the financial side of the equation makes sense, especially during Covid. As a bonus, we did informally poll our families, friends and social media friends, and the overwhelming consensus was that from a Covid standpoint, they’d all rather be renting a private residence over a traditional hotel to help minimize their exposure to Covid. This was a surprising but very positive revelation and we’re now even more excited to move forward…so stay tuned.