[Brad Beaulieu]

I am interested in buying a condo that would serve as a rental property only not my primary residence. Can any 2-coolers tell me what kind of downpayment I might expect to give up and what particular information my bank might need from the person selling and currently managing the property.

 

[BEER4BAIT]

You should expect at least an 80%, 2,3,5,10 year balloon on a 15-20 year loan variable rate. This is just a basic type investment property loan. Some brokers may have better lenders but remember this is an investment to put $$$ in your pocket so the more you put down the more goes in the pocket.

 

[Crab_n_Fisher]

Also check into the property tax rates, as they seem to skyrocket every other year.

 

[Brad Beaulieu]

Thanks. I have not ever done this type deal before so it is all new to me. I guess I need to learn what all that means !!! Thanks for the info.

 

[Crab_n_Fisher]

The Sargent Texas board seems to have the most #$#[email protected]$ folks when it comes to the tax rates....so keep it in mind! And please do not rush into any deal without researching the local environment first.....

 

[cybermania]

buy single family residence... a lot easier all the way around...

 

[Red3Fish]

My .02

I too like single family. Fixed rate only way to go for me. The high maintence fees usually made codos not work for me as a rental. AND there is talk afoot that insurance on those rental units may increase 300% to 500% in the coastal and Houston area. Kinda hard to tell where you are located! LOL

Not trying to be negative, just a fact or two to check out. Good Luck

Later
R3F

 

[Hullahopper]

An Appraiser's Views On Investment Property

I am interested in buying a condo that would serve as a rental property only not my primary residence. Can any 2-coolers tell me what kind of downpayment I might expect to give up and what particular information my bank might need from the person selling and currently managing the property.

Hello Brad & Welcome To 2 Cool!

Don't know where you live but something you should consider in a stable to relatively slowly appreciating real estate market such as Houston in general is that it is extremely rare for mortgaged investment property to have a postive cash flow. The financial gain is recognized after a substantial holding period with gradual appreciation.

In addition to the debt service (mortgage payment) you will be paying, there are numerous other expenses that have to be considered. If you pm me, I will e-mail or fax you a 2 page form know as an Operating Income Statement which you can fill out regarding the particulars of your property. A sumarized version goes something like this:

Gross Annual Rents
Less: Vacancy/Rent Losss: (usually 1-2 months/year)
Effective Gross Income

Less: Interior Paint & Decorating
Less: General Repairs/Maintenance
Less: Management Expenses
Less: Replacement Reserves: (money you set aside each month for items that will eventually have to be replaced such as: stoves/ranges, dishwashers, a/c & heating units, water heaters, washer/dryer, roof & carpet, etc.).
Total Operating Expenses

Effective Gross Income - Total Operating Expenses = Operating Income

Operating Income/12 = Monthly Operating Income

Monthly Operating Income - Debt Service = Net Cash Flow

Debt service = (principal/interest/taxes/insurance/monthly HOA)

Based upon a $80,000 +/- property for example, once you do this math exercise you will most likely come out with a $50 -$200 negative net cash flow depending upon how well you did on the purchase negotiations.

Since you are dealing with a condominium purchase you especially want to obtain a copy of the declarations and read them. Make sure you ask the management company if there are any special assessments pending or law suits that are unsettled.

Hope this helps you out some, shoot me a pm and I will get you the form described above. Good luck on you investment and again, welcome to the 2 coolest bunch of fishermen on the planet.

Regards,

Aaron

 

[dragnet]

Ditto to what Hullahopper wrote. There is a saying in residential real estate investing that "you make your money when you buy". Simply, you buy equity and let it appreciate over time while taking depreciation at the same time. Hopefully, the tenants pay the bill along the way.

Personally, I would be very careful of a condo UNLESS you are reasonably assured that it will appreciate in value and that you are buying substantial equity. My rule is that I won't pay more than 70% of the property's current value (not necessarily appraised value). Other investors I know won't pay more than 50-60%.

Just food for thought, but I agree whole-heartedly with Hullahopper.

 

[Brad Beaulieu]

Thanks for all the info guys. Keep it coming !!

 

[cybermania]

i agree buy your equity upfront.......