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New at investing and interested in rental properties in the Maryland/DC area. The condo & townhome prices are quite beaten down and look like great rental investment opportunities. There seems to be a lot of experience/expertise here. Given the market, is the required down payment & loan interest rate higher for rental investments? Any advise on what to do and what not to do (re: LLC/taxes, tenants, maintenance, etc) is appreciated.
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I'm not a lender but I DO KNOW that this is the perfect market for investors. Prices are lowering daily. Sellers are panicking! In our market, South Alabama, several smart investors are buying houses to rent because there is such a low number of them. They usually turn around and make more on the rent than they have to pay their mortgage lender each month. Of course, that's in a perfect situation.
I would DEFINITELY talk to your lender and realtor about weighing your options. Good luck!
Interest rate and down is higher for investment properties... there are usually reserves required between 2 - 6 months... there are honestly so many variables to consider... FICO, Income, Assets, number of current properties owned... these will determine your LTV or percentage of the sale price you get a loan for.
I would suggest the ideal minimum down payment ensures you are in the black at least $150 per month over your "true" rent received. Check the local are for rental agencies that offer advice, ie... try to earn your business and provide free info on the market rents and trends. Also there are several good books on the subject... How to Buy and Manage Rental property. Call with any question... and I'd suggest minimum 3 months reserves just for the rental(s)... Good Luck and Go For It... I've always enjoyed being on the high side of the rental market... usually better renters / less problems.
Thanks guys. I'm talking to a few lenders and realtors in the MD area at this time. Getting similar feedback on good investment opportunity but it also seems like theres more rentals available in the market. Will be researching it more, and plan to meet an attorney to setup the LLC/tax structure. Input appreciated.
Not all lenders will finance properties in a LLC. You may want to consider purchasing and obtaining financing in your name and then deeding the property to an LLC after closing.
You will get a lower interest rate and have more lenders to choose from.
In MD each LLC costs $300 per year to register. I know this from personal experience.
"Looking at investment rental properties - Any advise ? "
Yea, its called "Shorting"
Thx RefiLady. Any other tips to lower the interest rate... I'll plan to put 25% down, which may help. The ARMs (5/1 or 7/1) seem like days of the past.
Pick your area to make sure that it works from a cash flow basis.
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Make sure to talk with several lenders and get options from all of them.
In the SE/NC specifically, you rarely find lenders that will let you put less than 20% down.
Remember...you MUST have money put aside for vacancy rates, non-payment/evictions, fix-up and so forth. If you plan to have several units, a property manager may be a good option for you. However, you can do it yourself. Just make sure that you are protected, (research the laws and have a lawyer draft you a rental agreement if you do not use a Realtor or Property Manager's state forms-you can get other forms online, but I would still have it checked with a lawyer if it were me).
I am a direct lnder in the Condotel Market. I believe this is a great investment and or a secound home opportunity for anyone that is qualified.
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if they are such a great idea, buy them yourself!
Unless you can get a great bargain say 10-20% below the market, stay away for say the next six to twelve months. However real estate is very local. Best.
If you have capital to invest in a properties for years then now if not later on will be a good time to purchase, it's obvious the market is still heading south and will continue to for some time.
Azrob, I can't stand your comments....
You are thinking smart ! Certainly is a great time and opportunity to find a deal and make a smart investment for the future. Financing is more difficult for investment properties... buyers need to put down a larger downpayment, in most cases 15 to 20 percent and the rate will be higher too. Is still worth it as you have more equity and if the numbers work, a little higher of a rate should not make too much of a difference.
Good luck ! We are also looking to add to our potfolio of properties in Philadelphia.
Go for it! If you have the capital to put down, it is a fantastic idea to build an investment portfolio while prices are so low. Make sure your agent does a thorough market analysis that includes rental potential.
I am extremely pleased with my results with both of my recent investment property purchases. The numbers are important, but don't overlook the area, future development, rental rates, taxes, and the overall direction of the community.
If you are looking for long term reward, do as much research as you can. Call the local rental agencies and ask them how their numbers are in your area.
I formed an LLC for my rental properties. I highly recommend sitting down with an accountant to answer your questions and concerns.
Congratulations on making a very wise decision.
You need to have a strategy of what you hope to accomplish with the property. Develop your investment criteria, how do you expect a property to perform?
You cannot just look at price. You need to look at potential income. You need to factor in vacancy, repair costs, holding costs, etc. What sort of return do you want? If you pay 50% below market price, but cannot rent it out, or cannot at a mimimum pay off your note, then its still a bad buy. Do not go with the below market idea's. what is below today may not below tomorrow.
You need to develop your investment criteria and strategy, then go out analyze the properties to see if they fit into your criteria. Do not make the criteria fit the property that is a recipe for disaster. I've always said that two things wrong with real estate - 1) Its too easy to become an Agent. 2) Its too easy to become an investor.
Do your homework.
Does FHA 3% down exist any more for a 4 unit investment property if you are trying to buy a second one???
If so who is a FHA lender who would do this 3% down financing???
It may exist with certain lenders in certain locations...in my area you must have the intention on living in one of the four units. They/FHA will occasionally perform occupancy checks after you close the loan. Be careful!
agreed, you have to keep in mind that different lenders have different criteria.
For example if you purchase a 2 family home, that generates $800 per month/ per apartment= 1600 monthly x 12= $19,200 in rental income per yr, the bank however assumes that the one or more of the properties are/will be vacant for a few months to make sure you can cover that mortgage.
I'm sure someone else can chime in with further details in rgds to that.
Thx for the positive feedback. Any references for agents & lenders in the Maryland area, close to DC? Looking for pre-quals to move forward and put offers on properties.
I'm an agent in Logan Utah and own 2 investment properties that are townhomes and here's what I've learned over the past few years: Townhomes for the most part are a lot easier to maintain, have better tenants and are easier to rent out than most du/4-plexes. Of course that depends on the age and area the townhome is located in.
One drawback is that you can usually get a better cash flow margin off of 4-plexes than townhomes. In our area values have still been going up well enough that you'll need to put down 10-20% anyway to get a positive cash flow with any investment property.
Honestly for me - it is easier to have land and allow people to move their own mobiles or manufactureds on. That way when they leave they take the mess with them. I dont have to go in and clean up the mess that was left behind. My husband has some large equipment and a dump truck so if a mess is left on the land he can scoop it up and take it to the dump. That is the easiest way for me to have rental income. I also have other rentals, a mobile park, a few houses. I think it all depends on what you are looking for in the way of return now and later!
Get yourself a good agent - one that is familiar with the neighborhood and type of homes that you are considering purchasing. Make sure this agent has experience with investors and rental properties. The difference in purchasing a home and a rental property is huge! The downpayment is typically 20% down and the rate is higher. You might look for some for sale by owner properties or seller financing to see if you can find a property with less down. Usually, there are local rental housing associations that you can join for a nominal fee. Take advantage of their training, newsletters and forms. Education is key to being a good investor.
I living in Los angeles area.If you buy the house as investment at $270,000 (foreclosure or regular sell)( as today, you need minimum 20% down payment to avoid PMI )* Assume with no money down (it's easier for caculation).* Mortgage at 6.25% on 30 years term._ Monthly mortgage payment will be $1662.44_ Monthly property tax is $166._ misc. Monthly $170 ( insurance, maintenance, etc... )Total: round $2000.At this time, Los angeles rental markat price for that house is from $1800 to $2200.take it at middle is $2000. It's enough cover expense for the house.Here is the chart for will be equite of the house :At 5 years : $17,99010 years : $42,55915 years : $76,11320 years : $121,93925 years : $184,52530 years : $270,000Your expend time is 30 minutes for each month for that house( phone call, deposite check, maintenance, etc...)In 30 years you will expend 180 hours for the house.Take $270,000 / 180 hours = $1500 for each hour of your work.I don't talk about the house value will go up or down at that time.if you down payment 20%, and pay same amount $1662.44 mortgage payment for each month.your mortgage's live is 18 years and 1 month.(Loan amount $216,000, Mortgage at 6.25% on 30 years term.)
"I'm not a lender but I DO KNOW that this is the perfect market for investors. "
"Certainly is a great time and opportunity to find a deal and make a smart investment for the future."
So much certainty! Were you experts certain at the market's peak that everything would go down? Something tells me you were CERTAIN it was the best time to buy!
Correct the miscalculation
monthly property tax will be $270. for the house value at $270,000
Hoangchauphan. Your deal doesn't look that good. You need to cash flow at least $250 per month after all your time and expensenes. If your math is correct than go for it. My best advice is find a mentor you can trust that is doing what you are talking about. That's what I did...
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