Posted by David Krulac on February 15, 2002 at 17:42:23:
they figure that with vacancy, and maintenance that you never get 100% of the rent roll. If you rental income was say $20,000, the would only count you as getting $14,000 income at 70%.
David Krulac
JohnBoy - Posted by Duane(WV)
Posted by Duane(WV) on February 13, 2002 at 21:24:21:
Hello,I read an article on this site in which you said you didn`t think rental property was the best choice for beginning investors.My question is:What do you think would be the best approach for a beginner?And why?Thank You!
I think rentals CAN be a starting point… - Posted by David Krulac
Posted by David Krulac on February 14, 2002 at 08:30:27:
doesn’t have to be, and there are circumstances where it doesn’t suit your personality or your area BUT:
rentals can make sense for a starting point.
one strategy is to buy a personal residence at no or low down with the lowest interest rate possible. There are banks/lenders here lending fixed rate at less than 6%, which is hard to beat. Also there are lots of programs for homeowners including VA, 100% financed and FHA/HUD 97% financed. There are other state and community action programs that will lend 97 to 103% financing. again hard to beat. You move in for a year then find a new place and keep the old place as a rental. existing financing stays in place.
A friend of mine is using this strategy and is on his 5th house, this one is a 4 unti owner occupied. His last was a 3 unit. All five properties were bought owner occupied highly leveraged and he lived there for 1 year.
another varient is to initially buy a 2 unit/duplex and live in one and rent the other. This is an easy way to start in the rental business. If the duplex is on 2 deeds or can be separated then so much the better. You could then split off one unit and sell if you decide not to be a landlord. Sort of a condoization without all the hassles. Or combine both startegies and buy small units live in one and move after a year.
one of the keys overlooked by novice landlord wantabees is that the property must be a positive cash flow situation. Don’t buy a negative cash flow at least as a starting point. Novices disregard negative cashflow and maintenance costs and end up in trouble sometimes to the point of losing money and sometimes losing the property. Don’t go there.
David Krulac
Re: JohnBoy - Posted by JohnBoy
Posted by JohnBoy on February 13, 2002 at 21:39:12:
Read my article at this link:
Re: I think rentals CAN be a starting point… - Posted by Joe M.
Posted by Joe M. on February 14, 2002 at 10:01:30:
Hey David, Your friends plan to buy owner/occupied low down sounds like my plan. The problem I see is that all first time home buyer programs you can’t have purchased within the last 3 years. I’m wondering how your friend is working around this? thanks and happy investing!
Re: I think rentals CAN be a starting point… - Posted by David Krulac
Posted by David Krulac on February 14, 2002 at 13:48:31:
not going first time home buyer. VA=100% financing, FHA=97% financing and conventional finacing =95% regardless if its first time.
hth
David Krulac
Re: I think rentals CAN be a starting point… - Posted by Joe M.
Posted by Joe M. on February 14, 2002 at 20:00:02:
Well i don’t know about VA, But Fha is according to the guidlines i stated,only every 3 years. So I take it your friend makes a good income to level out his debt-to-income ratios?
kinda on the same subject; I know they count 75% of rental income toward your loan but does that mean i only need to qualify for the other 25% or does that mean they put that 75% toward my income and then look at my ratios to see if i qualify? Any idea?
thanks again for the previous response, JOE