Q. I have the ability to pay all cash or take out a 15 year mortgage with 20% down at 3.75%.. My money is not earning much in the bank. The property will rent for about $1,000/month.
Are there any sites where calculations can be made to evaluate suitability of investing in rental property? Thank you.
Are there any sites where calculations can be made to evaluate suitability of investing in rental property? Thank you.
A. You will get the best interest rate if you can put 25% down on an investment property. So, I would at least consider that as a minimum number if you decide to finance.
It's tough to answer this question without knowing other factors such as how much other savings do you have. Do you own a home as your primary residence? Is that home paid off?
Assuming your primary residence is paid off, I would not pay 100% cash, but maybe putting 50% down, and taking out a 10 year mortgage instead of a 15 year. 10 year rates are as low as 3.375%. Have the renter payoff the rest of your home, and put the other money either as a down payment on another home or other investment options.
It's tough to answer this question without knowing other factors such as how much other savings do you have. Do you own a home as your primary residence? Is that home paid off?
Assuming your primary residence is paid off, I would not pay 100% cash, but maybe putting 50% down, and taking out a 10 year mortgage instead of a 15 year. 10 year rates are as low as 3.375%. Have the renter payoff the rest of your home, and put the other money either as a down payment on another home or other investment options.
What is a good formula for splitting profits on a rental property investment?
Q. I am involved in a 3-way investment on a rental property and we are being forced to sell because of a DOT project. Our profit on this property will be approximately $75,000 and we need to figure out how to split this up. Being close family members, we weren't too concerned about figuring this out we bought the property.
I would really appreciate any suggestions from real estate investors experienced with partnership investments like this.
Here are the figures for the capital and work/mangement invested by each party.
Investor #1:
Invested $150, 000 by taking out a regular home loan.
Lived at the property and payed "rent".
Did 85% of the maintenance, improvements and rental property management.
Investor #2:
Invested $75,000 from a home equity line of credit.
Did 0% of the maintenance, improvements and rental property management.
Investor #3:
Invested $25,000 from a home equity line of credit.
Did 15% of the maintenance, improvements and rental property management.
Thank you!
I would really appreciate any suggestions from real estate investors experienced with partnership investments like this.
Here are the figures for the capital and work/mangement invested by each party.
Investor #1:
Invested $150, 000 by taking out a regular home loan.
Lived at the property and payed "rent".
Did 85% of the maintenance, improvements and rental property management.
Investor #2:
Invested $75,000 from a home equity line of credit.
Did 0% of the maintenance, improvements and rental property management.
Investor #3:
Invested $25,000 from a home equity line of credit.
Did 15% of the maintenance, improvements and rental property management.
Thank you!
A. Since Investor #1 paid rent and primarily maintained the home, it would be split like this
$250,000 purchase price; profit is 75,000 (I assume you have already taken the maintenance out of this)
Investor #1 paid $150,000 / $250,000 = 60% of $75,000 profit = $45000
Investor #2 - paid $75,000 / $250,000 = 30% of $75,000 = $22500
Investor #3 - paid $25,000 / $250,000 = 10% of $75,000 = $7500
If you haven't taken out the maintenance, then you need to deduct the cost of maintenance out of the profit and pay each of the parties back for the maintenance they paid. Keep in mind that investor #1, as a renter, would normally have had to maintain the property but I'm assuming that he did more than just "maintain" the property.
$250,000 purchase price; profit is 75,000 (I assume you have already taken the maintenance out of this)
Investor #1 paid $150,000 / $250,000 = 60% of $75,000 profit = $45000
Investor #2 - paid $75,000 / $250,000 = 30% of $75,000 = $22500
Investor #3 - paid $25,000 / $250,000 = 10% of $75,000 = $7500
If you haven't taken out the maintenance, then you need to deduct the cost of maintenance out of the profit and pay each of the parties back for the maintenance they paid. Keep in mind that investor #1, as a renter, would normally have had to maintain the property but I'm assuming that he did more than just "maintain" the property.
How can I invest in cash only rental property not with cash but using a loan?
Q. I live in Los Angeles looking to buy rental property in Florida. I'm looking at small investments (under 40,000) to then rent out. How can I take out a loan so I don't use all of my own money? (Cash only sellers will not wait the period it takes to secure the loan . . . ).
A. You would need personal loans leveraged against your other assets.
YOu are very brave.
YOu are very brave.
What do I need to know before I buy rental property?
Q. I am looking to buy some rental property in Arkansas. I have been saving for a little while to have some back up money as well as have someone to invest the down payment. I am not sure as to how much down payment I will need, or what to expect with an investment loan. Cost is $200K. What percent do I need to put down. How long can at what APR can I expect the average investment loan to be?
A. Most standard investment loans require 20% down. It used to be easier to get some at 10% down or even 0%, but those free money days are quickly going, goin, gone. Most investor loans run .5-1% higher than a residential loan. Investment loans can run from 15-40 years, depending on the amount of the loan and your needs.
An excepton to this is if you buy a VA or Bank foreclosed house. The VA offers "Vendor Financing" for investors at 6.5% for as little as 5% down, although there are limited numbers of these properties. Banks selling foreclosed homes also are often willing to provide good financing deals if you are an investor with good credit and some cash.
One thing to advise, with today's mortgage situation it is very important that you make sure the financial structure of any deal is smart. On poster mentioned the old addage that "borrow as much as you can" and in normal times that is good advice. However I lived through boom and bust, in particular I lived through the S&L meltdown of 1980. When you have a situation where property values are DECREASING, as they are in many areas of the country, maxing out mortgages becomes a dangerous strategy.
The idea of maxing out mortgages works, because even if you end up in a financial pinch you can always refinance or sell your property for more than you bought it for. However, for the next few years, if you are able to get a 90%down loan your property may not be worth that next year and you will be stuck on the fast road to foreclosure and bankruptcy.
Don't get me wrong, buying investment real estate is a great move right now, the best investment you could possibly make. But the market has changed drastically and people who don't adjust to the realities will lose money. Now is a time to buy properties cheap, with conservative loans and rental situations where you get good monthly income and wait it out for 2-5 years when the market recovers. Then you can either sell for enormous profits or refinance to pull tax free money out of your property and keep on renting it.
I'm also working with partners to purchase properties that are light fixer-uppers cheap, do the repairs, refinance to get our investment out, then rent it out. Before we would have flipped it, but the financing and the buyers are not out there to make it worthwhile. If nothing else, all those people being foreclosed on need some place to live.
You will make an imense amount of profit, but it will take more time for the profits to show themselves.
Hope this helps, and I'd love to hear how you do
An excepton to this is if you buy a VA or Bank foreclosed house. The VA offers "Vendor Financing" for investors at 6.5% for as little as 5% down, although there are limited numbers of these properties. Banks selling foreclosed homes also are often willing to provide good financing deals if you are an investor with good credit and some cash.
One thing to advise, with today's mortgage situation it is very important that you make sure the financial structure of any deal is smart. On poster mentioned the old addage that "borrow as much as you can" and in normal times that is good advice. However I lived through boom and bust, in particular I lived through the S&L meltdown of 1980. When you have a situation where property values are DECREASING, as they are in many areas of the country, maxing out mortgages becomes a dangerous strategy.
The idea of maxing out mortgages works, because even if you end up in a financial pinch you can always refinance or sell your property for more than you bought it for. However, for the next few years, if you are able to get a 90%down loan your property may not be worth that next year and you will be stuck on the fast road to foreclosure and bankruptcy.
Don't get me wrong, buying investment real estate is a great move right now, the best investment you could possibly make. But the market has changed drastically and people who don't adjust to the realities will lose money. Now is a time to buy properties cheap, with conservative loans and rental situations where you get good monthly income and wait it out for 2-5 years when the market recovers. Then you can either sell for enormous profits or refinance to pull tax free money out of your property and keep on renting it.
I'm also working with partners to purchase properties that are light fixer-uppers cheap, do the repairs, refinance to get our investment out, then rent it out. Before we would have flipped it, but the financing and the buyers are not out there to make it worthwhile. If nothing else, all those people being foreclosed on need some place to live.
You will make an imense amount of profit, but it will take more time for the profits to show themselves.
Hope this helps, and I'd love to hear how you do
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