Trying to get government loans for investment property takes a lot of energy and from whom I have spoken to the only people who get them are the investors who do not need the loans. There are many other ways to get financing for your investment properties. But, before you worry about financing you need to know what to look for in an investment property.
As this article is being written Papa Roddy has purchased 7 investment properties in the last 2 months. The last property Papa Roddy purchased for $27,000 cash to which the bank turned around and refinanced for $43,000. The best thing about the investment property was that it needed very little done to get the house rented. Meaning Papa Roddy was able to reimburse his savings, pocket an additional $15,000, and rent out his 3 bedroom house for $600 per month. Not a bad deal. The following is a conversation that he and I had about what he looks for in an investment property. Also, you can take a look at the pictures above to see, one of the properties that he has purchased.
What do you look for in an investment property?
Location, location, location. Outside of location I like to purchase rental properties that are close to where I live. My reasoning is that if something breaks I do not want to drive 2 hours away just to see how serious the problem is. The time spent and expenses paid all take away from your profit margin and your quality of life.
Purchase in an area that will grow in value. Do not purchase the most expensive home in the neighborhood; buy a home at the low-end…very low end.
Lastly, the numbers have to work. When purchasing a rental property, home etc you have to calculate more than just the payments on property. Do not forget to take into consideration: taxes, insurance, maintenance, and a savings for cushion. All these expenses figure into the equation when calculating the rental value of the property. After these add in your profit margin to see if the deal is good or if you should pass.
How do you estimate your offering price?
When figuring an offering price ask yourself these questions:
- How much work do I have to put in to make the duplex or apartment livable?
- How much can I rent the property for?
- Should I sell the home after the property is remodeled?
- What is my break even point after purchase and repair?
Check out the local courthouse for surrounding properties that have sold and what their sell value was. Then use that information to find where your property matches up in the price point. Then make the offer according to all the information gathered.
Lastly, do not fall in love with any property, as you must be able to walk away if the bank or seller does not accept your offer.
How were you able to refinance 3 apartments and purchase 7 others in a down economy, after only 5 years after bankruptcy?
After our restaurant failed and we were forced to file bankruptcy we kept our credit sparkling clean by never over extending ourselves and keeping credit cards paid every month.
Next, I found a local bank, not a large conglomerate, but a small personal bank. I went into the local bank with a plan. I did not go into the bank empty handed and on a fishing expedition as I knew that they would not appreciate me wasting their time. I was direct in what my desire was, however I was friendly and listened to them carefully never interrupting them as they spoke.
Remember, when entering into any bank for financing that they are in the business of selling money and since you need money they want to sell to you? Have you ever willingly desired to turn down a potential client? Neither have they. But, before you enter into the door you have to know what you want and be willing to risk rejection.
What type of investment property should potential buyers be looking for in this market?
Potential buyers should be looking for foreclosures and rundown properties that are in decent neighborhoods. Look for homes with potential that with some minor repairs such as painting, yard work, etc would make a major difference.
Also, older folks who are looking to sell their investments to retire sometimes will even help with financing. As their homes are mostly paid off and they will enjoy the monthly residuals coming in.
Above all keep your ears open and keep talking to people as someone is always telling of a bargain.
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This is a very informative post! Keep up the good work.
Checking you out, there young man…..looks great. See you soon
And I just fixed all the kinks in the site! Turns out that I didn’t update it with the times. Thank you for bringing it to my attention