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My husband and I are looking at properties. We saw one yesterday that my husband would like to put an offer on. I asked our realtor to send us the comps but he never did. Yesterday all he kept telling us was what homes across the street are listed for. But I don't care what someone listed their home for, for all I know it's overpriced.
My husband doesn't seem to care what they comps are in the area. He hasn't done the research in the area for what homes have sold for in the area.
Isn't this something basic to be done on something you will put an offer on?
Your Realtor should be able to provide comps for the area if there have been recent sales. If you're purchasing this as an investment (I'm assuming you mean to rent it out) then you also need to figure out whether or not it will be a good investment. Have you figured out what your monthly income and expenses would be on the property? Your Realtor should also be able to tell you what homes in the area are renting for or put you in touch with a property manager who is familiar with rental properties in the area.
WendyK is on the right track, but honestly if you guys are serious about doing this is as an investment you ought to be able to track down this sort of info on your own.
I can show you numerous neighborhoods where the listing price is way way out of line with what current sales prices are.
You could really lose your shirt in this environment...
Oh lordy, PLEASE hunker down and do your due diligence! Your realtor should be helpful in directing you to any information sites necessary, and should be willing to provide any and all info available to a realtor - in a timely manner. Do yourself, and your realtor a favor and let him know your expectations. If he is held up and can't respond, he can call and tell you why! Best of luck to you - hope to hear good news.
My husband doesn't seem to care what they comps are in the area. He hasn't done the research in the area for what homes have sold for in the area. Isn't this something basic to be done on something you will put an offer on?
The other posters are correct in what they have advised. Your realtor should be able to give you sold comps and make sure they are no more than 60-90 days old.
Unless you are paying cash for this property, you will be paying a higher rate of interest for an investment property and it may be a bit more difficult for you to find financing, although not impossible. Call a lender and see what the rates are for investment properties. Also decide how long you will be holding this property as an investment. When you are ready to sell it, you will owe capital gains tax of 15% on any profits, unless you do a Starker exchange (1031) and purchase another property for the same or higher amount than what you sell your property for. I would sit down with your tax man to find out the pros and cons first, so you know what you are getting into before moving forward.
I have owned several types of investment properties. I have made lots of money on some and barely broke even on others. You need to be looking at the worst house in the BEST neighborhood. Location, location, location rule still applies and good luck to you both
There is, however, a trap that is easy to get sucked into: the best neighborhood to own investment property is NOT always "the best" neighborhood overall. Further, if the "worst house" is BAD for all the wrong reasons it may not be a good investment.
Examples: If the "best neighborhood" is a place that has homes that rent for an exorbitant amount there is very limited pool of renters that will pay that. Ditto if you buying to fix up and flip -- at certain price levels you are chasing too few buyers.
When it comes to the house that is "bad" for good reason you ought to look at place that is basically sound, has a good layout is not located near an irremediable negative (weedy lot is fixable, town sewage plant is not...).
These are BASIC things that LOTS of people have known for a really long time. Thus there are fewer places that are "ripe for picking" despite the price declines and foreclosures.
I have no doubt that for those who carefully weigh the positives and negatives of properties, put in the kind of research to determine which properties really do represent value, and have the work ethic to actively and appropriately bring a property to the condition / audience that will result in appreciation there are opportunities to make money.
For those with less than good luck, an unbusinesslike approach, or failure to weigh all the downsides they will not fare so well...
one of the biggest mistakes most people make with the first purchase is spending more than they can rent the property out for.
a lot of people try to buy the place they can pay for instead of the property that can pay them.
what i mean is, if you can afford a home for $150k but you can only rent it out for $1k a month, you may be breaking even. but if you buy 2 homes for 75K and get $500 from each or more, now you are making money.
my vacation rentals make me $22k a year and i have yet to actually claim a profit because of all the wonderful write-offs you can take advantage of.
1 more aspect to consider also is the ability to make double payments. if you can purchase a property and make double mortgage payments or extra payments you can pay it off that much sooner.
i personally prefer to make double payments and pay off properties in 6 years. i do carry HELOC's on my properties, but most have 0 balance and its there for emergencies, appliances that break or if i need money for anything i can draw on it.
i personally prefer to make double payments and pay off properties in 6 years. i do carry HELOC's on my properties, but most have 0 balance and its there for emergencies, appliances that break or if i need money for anything i can draw on it.
You lenders will provide HELOC's on investment properties? Wow. The lenders I know only provide HELOC's on primary residences, not investment properties.
You lenders will provide HELOC's on investment properties? Wow. The lenders I know only provide HELOC's on primary residences, not investment properties.
first of all, its the ONLY lien i have on each of those properties. not all are paid off, so not all have them. i assume the way things are now it would be difficult to get them, but do able. as i have great income and credit. one thing i should mention is that my credit limits did shrink a few months ago when the banks were scraping for change.
I hate to bring it up, but bad economic times present extra risk for investors. If a tenant loses his or her job or gets into financial trouble, sometimes s/he will get behind in the rent. It can be difficult to evict tenants (legally and emotionally) and you may have to pay the mortgage for months without rent money coming in.
Hopefully, this will never happen, but you'll need to have extra cash reserves to carry you if it does. This is another reason it's so important to run the numbers before you buy investment property. If a property doesn't pencil out, it generally makes no sense to buy it, even if it's priced below the comps. In this economy, I would be very, very conservative. Good luck!
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