How Real Estate Investment Groups Work

Real estate investment groups are like small mutual funds for rental properties. If you want to own a rental property, without the hassle of being a landlord, a real estate investment group may be the solution for you.

How it Works
A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company, thus joining the group. 

A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all the units, taking care of maintenance, advertising vacant units and interviewing tenants. 

In exchange for this management, the company takes a percentage of the monthly rent.

There are several versions of investment groups, but in the standard version, the lease is in the investor's name and all of the units pool a portion of the rent to guard against occasional vacancies, meaning that you will receive enough to pay the mortgage even if your unit is vacant. 

For more information about Real Estate Investment Groups visit us online at Carlisle-Mitchell.com

How Loan-To-Value Ratio Affects the Cost of a Mortgage

Loan-To-Value Ratio is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. 

Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.

Calculated as: Mortgage amount divided by the Appraised Value

For example, Jim needs to borrow $92,500 to purchase a $100,000 property. The LTV ratio yields a value of about 92.5%. Since bankers usually require a ratio at a maximum of 75% for a mortgage to be approved, it may prove difficult for Jim to get a mortgage.

Similar to other lending risk assessment ratios, the LTV ratio is not comprehensive enough to be used as the only criteria in assessing mortgages.