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Real Estate Investing
Buying an Investment Property
Buying an investment property means that you already have a home and you're buying a second or you're simply buying a home to rent it out. If you can afford it then real estate investing is always a great idea because everyone needs a home and the market will always bounce back no matter how bad it gets. So investing for the long term is always a good idea.
A one family investment home or condo will require a 20% down payment and a multi-family home will require a 25% down payment. Don't listen to the infomercials that tell you about "no money down" plans because you won't be able to do it. They want you to borrow from a friend or family member, find an investor, take loans against your retiement plans or worst of all take a 20% loan with the person you're buying the home from. So I guess there are options but highly unlikely.
You're going to have to do a little math of your own in order to free up some borrowing power so that you can buy a second home or investment property. The banks are actually quite simple... They want to see less than 40% debt to income ratio of your gross income. Take 40% of your gross monthly income and subtract any loans including mortgage loans, personal loans, car loans, student loans and minimum payment on your credit card loans. You're allowed to borrow the rest assuming your credit score is in tact. Do not include house bills, taxes or insurance bills as they're included in the 60% already.
Now you need to look at condos, homes, duplex's or multi-family investments to see what you can afford. Let's assume you have $1500 left over after subtracting all of your current loans which means you can afford the monthly payment but you can't come up with the down payment. Simple fix..
Go to the bank and get a personal loan for $30,000 over 5 years which will be a high interest rate of about 10-11% and a monthly payment of about $640. Now you have a 20% down payment on a $150,000 home but you subtracted $640 off of your available $1500 per month giving you $860 left. Financing the balance of $120,000 over 30 years is $650 and taxes would need to be less than $210 per month and you're within your $1500 budget.
Personal loan - 5 years - $640
Mortgage Payment - 30 years - $650
Monthly Taxes - $200
Total = $1490 per month
This is a very type scenario but it's meant to give you options. You could look at foreclosures or cheaper condos and still afford your real estate to begin your career in investment properties.
Learn how to rent your new property without doing a thing!
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