Investment properties carry higher base rates than primary residences, which means points can produce larger absolute savings. The interest and points may be tax deductible as business expenses.
The main risk with investment properties is a shorter expected hold time. If you plan to sell or refinance within a few years, points may not pay off before you exit. Patrick Kevin Fagan helps real estate investors in San Antonio evaluate the math.
Savings Potential
Investment property loans typically carry a rate premium of 0.5% to 1.5% over primary residence rates. Higher base rates mean each point purchase produces larger dollar savings. On a $300,000 investment property loan, 1 point costs $3,000 and might save $60-$80 per month. Patrick Kevin Fagan helps San Antonio investors calculate their potential savings.
Tax Deduction
Mortgage interest on investment properties is typically tax deductible as a business expense. Points paid may also be deductible, potentially in the year they are paid rather than amortized. Consult your tax advisor for your specific situation. Patrick Kevin Fagan works with investors throughout San Antonio and the Texas Hill Country.
Timeline Risk
The biggest risk with points on investment properties is the shorter expected hold period. Many investors plan to refinance or sell within 3-7 years. If your break-even is 40 months and you sell in 36 months, you lose money on the points. Patrick Kevin Fagan recommends conservative break-even assumptions for investment properties.
