Buying a rental unit?

Question

Here's the situation. I'm currently a homeowner, but would like to buy another house or condo to rent. I'd do it if the rent could support the place, but in my market, South bay area in California, property is just so expensive, I can't see how rent could possibly cover mortgage, maintenance and taxes.

I do have enough to make a 10% down payment. I would hope the investment would pay off over the long haul through accumulating equity and waiting for rents to rise.

Any ideas how I can accomplish this goal?

Err. OK, I goofed on one aspect. I live in Northern California, in the south San Francisco Bay Area. Sorry, I wasn't clear before.

Why am I looking at real estate? Because real estate has a great track record of growing in value over time, while the mortgage slowly works off the debt.

Why a rental? Because rents historically go up in price over the long haul, while a fixed mortgage does not.

Why does it have to be in the south bay area? Because that's where I am. I want to be close enough to manage it and keep an eye on it, and not pay a property manager, who won't do the job I will. I also do not wish to buy real estate blindly in some area of the country I know nothing about.

Answer 1

Kevin, Your question brings up so many more! I always ask people who want to work with me a couple of questions when they want to be a real estate investor:

* Why real estate? There are alot of investment vehicles out there. So, what makes real estate so inviting?

* What makes you want to invest in real estate? Are you up to asking for the rent? Do you have enough reserves when the rentors either don't pay or are late?

* What is your goal (ie long term wealth building [it is NOT get rich quick] or possibly cash flow)

That being said, you don't have to buy in Southern California. There are many opportunities all over the country that 10% down (or less) can provide a rent payment that will pay the mortgage. There are enough deals out there if you find a motivated seller that you can accumlate wealth and not go negative on a monthly basis.

If you decide you want real estate, but don't want to mange it, you can place your money with an investor like myself who will give you a great return that is backed by a mortgage.

Hope that helps.

GA_John

Answer 2

As a real estate broker and investor in Southern California, I understand what you're saying. Even properties in which the owners don't want anymore, will most likely negative cash flow even with their existing mortgage in place.

For the buy and hold strategy that you're trying to do, you have two choices, you can invest in out of state areas, like Idaho, which has great appreciation values and positive cash flows or make the decision to invest for equity or cash flow in your area. It is hard to do both.

For out of state investments, look for companies that will do this for you and will even include property management. For example, this company will find you property all over the states that have positive cash flow after all expenses have been paid, including property management:

www.inwiththenew.com

I like this company because they go with a low appraisal with the property and offer less than that for you to buy it. A typical home will cost you from 17-35k down (including loan costs, down payments on home, management costs) and will positive cash flow around 200-300 dollars a month. I researched a few properties that they offered and they looked like great deals for a long term strategy. If you like what you see, let me know and I'll go over any questions you might have. If interested, then I'll sign you up to gain access to this list. It cost $200 a month and you'll get an e-mail once every 2-3 weeks with 1-4 properties available. With the $200/month cost, they will also send you education material on real estate investing. Their information is not that good, but it does point you in the right direction and makes you think about other ways to invest and to protect yourself. They also have a weekly teleconference where you can ask any question you want and go over a deal you're working on to see if it's a good deal or not. I'll also assist you on a personal level with whatever real estate questions you might have.

Regards

Answer 3

If you have strong credit, you should use as little as your own money as possible.Lender want to see you have money in the bank and if a emerency comes you are prepared. Get as high LTV as possible and get into as many deal as possible. Look for wholesale deals, builder close out.. foreclosure bailout.. rehabbed homes. If they are out of state you want know the area so get a good appraisal. within a 1/2 mile of subject property and sold within 6 months if possible. On condo pulls comps within the same complex. You should buy 75% - 90% market value. If you are holding to rent research the rent within that zip code (property management company are good for that) and then get a good estimate of what your mortgage payment will be(there are a unlimited amount of loan programs) Get a good loan broker that is not going to charge upfront broker fees and back end broker fees. I started as a mortgage broker. Learn Learn Learn visit website-- There is alot of information out there some good
I do lease purchase for investors nationwide.

Answer 4

Thank you for your question. I have properties nationwide that that bring you some cash flow with 10% down payment. Please feel free to email or call me.

Sincerely,

Vladimir Rozumniy
Sr. Vice President
American Mortgage and Real Estate Group
Tel: [phone]
Email: [e-mail]
http://www.amregroup.com

Answer 5

I'm a nationwide mortgage loan officer with several clients that are R.E. investors, some of which live in California.....they are purchasing rentals, duplexes, 4 unit properties in other states where there is cash flow on rental properties as it isn't making sense for them to purchase in California.