b) General Guidance
Buying Real Estate To Rent:
You’re investing in real estate for profit. I’ll be there to help you do it right the first time.
With the exception of some “PUD’s, condo’s, co-ops and trailer parks” most all property can be rented for income. I’ll help you find what you like, however, I personally recommend multi-unit properties for the following reasons.
THE ADVANTAGE of 2, 3, and 4 plex (unit) properties are:
|1||They offer a higher percentage of rental income compared to a single family home of comparable cost.|
|2||The rent collected from 2, 3 and 4 unit properties is considered when qualifying for the loan. This means you may qualify to buy a more expensive property. If you buy a more expensive property, when property values go up you’ll make a larger profit. When rents go up you’ll make more profit due to having multiple tenants/rents.|
|3||If you intend to live in one of the units, then FHA guidelines could apply. If you qualify, this allows you to purchase with the least down payment, as little as 3.5% of the purchase price. There are even loans (called FHA 203K) that allow the purchase of homes that need extensive work. It finances the home and the needed repairs.|
|4||If you get a bad tenant you will still have the other tenants to collect rent from while dealing with the issue.|
|5||Due to higher rental income you can afford to have a professional property management company manage the property for you.|
|6||Being a larger property and collecting more gross rent it will be easier to find a good property management company willing to manage your property.|
|Properties over 4 units have many of the same benefits mentioned above however bank financing requires a 20% minimum down under the best scenario and often 25% or more down. A formula you can’t go wrong with to calculate what percent a bank will finance on 5+ unit properties is: 75% of the rent must be equal to or greater than 120% of principle, interest, taxes & insurance. (.75 x rent ≥ 1.2 x piti) Or just call me and I’ll crunch the numbers for you.|
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Questions? Call me 707 332-8301
or e-mail me Alex@NEWSTANDARDREALTY.com