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I did a search on this forum to see if there have been any other ignorant souls like myself asking these questions dozens of times in the past, but wasn't really finding what I wanted. We're interested in purchasing an investment property but have no idea where to start, who to talk to, what to be looking for in terms of loan products, what our chances of qualifying are, etc. so am looking for some direction.
Our stats: late twenties, no kids (yet), stable work histories, strong credit (both somewhere in mid 700s), combined annual income $96K. Current debt load is $133K home mortgage, $25K student debt, and $9K owed to a family member. No credit card debt. Outside of mediocre cars and home equity, not a whole lot in the way of assets, and savings is under $10K as we tend to avoid taking out any loans but we otherwise are able to accrue savings relatively quickly. Other considerations- we have several house projects that will be needing to be done in the next couple of years (replacing heating/cooling systems, bathroom renovation, and currently in process on other renovations that are mostly already paid for).
I have a good head for the local real estate market as well as renovating homes/ yards, and I am wanting to buy a local foreclosure in the $30K-$70K market (yes, things have gotten that bad) that we would either hold on to and rent for a couple of years or put back on the market after completing needed renovations (which we have become experienced in with our own home and family members' homes). I have seen persons buying homes in the areas we are targeting in this range and selling for $60-$100K more than their purchase price within a relatively short amount of time (and, in some cases, seemingly not much work done to the homes).
So, my questions are: What are our chances of qualifying for a loan on an investment property (mortgage and/or rehab)?
What type of interest rates and down payment requirements can be expected nowadays for investment property purchase?
Outside of costs for mortgage, PMI, taxes/insurance/utilities, and city-required repairs, are there any special considerations when purchasing foreclosures and/or investment properties that we should be aware of?
And what other questions should I be asking? Any thoughts, advice, or issues folks are aware of would be very welcome and appreciated. Thanks in advance for any help/ guidance- it's not often that I find myself on the side of being the one asking the questions here on C-D!
you're in a great position. you are making enough and only have a small amount of debt.
you can qualify for about 350k give or take a few thousand. that should give you great flexibility. I would suggest you stay away from Condos. condo fees will only rise and will kill you in the end. i would suggest going with a townhouse and renting it to one or two families/people. you can do better as far as getting most of your mortgage recovered....and if you're lucky, have a few bucks left over!
i also recommend that you buy insurance for the rental place as far as getting repairs done. where i am, i'm paying 450 a year for insuring my condo, and for everything that goes wrong, i pay 55 bucks and they fix or replace it. it's well worth it since you don't have to lift a finger. now, if you're a handy man and if you have the time for repairs, you may want to think about this one more carefully.
I have to warn you that the best way to get a really really run down property is CASH. If you have to borrow from a regular lender it is hard to make money on properties that need alot of work.
I can go into a long list of ways to get cash that do not involve a regular lender, but that is not what you asked...
Regular lenders expect that loans for investment properties are going have a BIG downpayment, the borrower should also expect much more scrutiny about their debt:income and much less leeway on rates. Basically lenders do not want to "help" someone get a start in this sort of market...
Frankly I CAN understand your enthusiasm as there ARE some really good opportunities to get properties MUCH cheaper than they were only a short time ago. The lenders, however, recognize that even though prices have fallen there are still MANY risks to what you want to do.
The thing about your situation is that you say you owe about $170k in debt and have income of about $96k SO technically you probably COULD swing a regular loan EXCEPT FOR the downpayment. SAVE that up ASAP! If you can get about $15K set aside a regular lender MIGHT be OK with approving you for a place around $60k, but still, personally I would worry that you might have too much downside.
If the work your house "needs" become critical things could expensive VERY fast, and if the timeline that the investment property needs work gets delayed that becomes just an expensive place that is not making you any money. Risky!
See if you had cash (or non-traditional funding) you would have a much bigger "cushion" against all the unexpected stuff AND THAT is what really dooms start-ups...
The list of "non-traditional" sources of cash for investment properties starts with places 99% of people do not want to go -- their relatives and friends. In addition to those sources you can include "business people that you already know" -- the guy who takes dents out of my car, my dentist, the guy that owns pawn shops, the guy who owns a local mortuary, et cetera. Beyond that there are a fair number of people that themselves have invested in real estate but no longer wish to do the hands on / leg work intensive parts of dealing with tenants, finding semi-workable houses and cleaning / fixing up. Some such investors do take out ads in newspapers or online. Some band together and become "hard money lenders".
If you want me to "write a script" so you can hypnotize your brother-in-law into giving you all the cash he has locked up in gold so you can buy some fixer upper houses I gotta tell you that is one heckuva long shot, but honestly given the way banks have tightened lending it might worth it !
How much equity do you have on your home? Do you have a HELOC?
Yes, there are folks who make money flipping house but a lot less than before. Don't over generalize that property A was purchased for X and sold for X+Y. There are lots of people who get that piece of the pie.
How much equity do you have on your home? Do you have a HELOC?
Yes, there are folks who make money flipping house but a lot less than before. Don't over generalize that property A was purchased for X and sold for X+Y. There are lots of people who get that piece of the pie.
What is the rental market like in that area?
Just an FYI that the OP started this thread more than two years ago .....
Well, hopefully he has at least repaid the relative the 9k by now.
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