Get vetted before you bid
Sellers today have no shortage of interested buyers. In some cases, however, what they may lack is qualified buyers. Lenders have tightened their borrowing standards during the pandemic to address the backdrop of economic uncertainty. So, when sellers take a chance on a buyer who needs financing to purchase a home, they run the risk of that deal falling through.
Many investors have the option to leverage the equity in their existing properties to add new ones to their portfolios. But if you intend to finance your next income property with a mortgage, then getting a pre-approval letter is a truly important step to take.
You may be aware that a pre-approval letter technically won't guarantee you a mortgage. But what that letter does signify is that a lender has reviewed your finances and made the determination that you're qualified, in theory, to borrow a specific amount of money to buy a home. And that's the sort of information it really pays to put in front of sellers right now.
Imagine you're engaged in a bidding war with a handful of other buyers whose budgets are similar to yours. If you're the only buyer in that group who has a pre-approval letter in hand, the seller may be more inclined to go with your offer over another, so long as your bid is competitive.
Furthermore, if you're already planning to finance your next income property with a mortgage, getting pre-approved won't require a lot of extra work on your part. During the home loan application process, you'll need to provide extensive documentation to a lender, so gathering that data for pre-approval purposes will leave you with less work to do after the fact.
Increase your chances of success
Now that more jobs are being added to the economy and the unemployment rate is dropping, the demand for rental units could continue to escalate in the near term as people reach a point where they're financially stable enough to start signing leases. Plus, rent prices are soaring in most markets, so if you buy an income property now, there's a good chance you'll manage to command top dollar for it.
If you want to increase your chances of getting an income property offer accepted, work with a lender to get a pre-approval letter. It could work to your advantage when you're up against stiff competition.