Posted by Michael Morrongiello on June 07, 2005 at 16:52:10:
Carlos:
What you are being told is accurate…FOR RETAIL PRICED homes. These marketplaces have remained VERY strong and have appreciated substantially recently so that one paying a retail sales price for the property will no longer have immediate cash flow if financed with a traditional fixed rate loan at 90% or 95% LTV.
Either you have to go with what I call “voodoo financing” loan products being offered (interest only, below market interst only ARM’s, etc.) and create a possible positive cash flow situation for you that way or you will have to come in with a LOT more cash down initially.
Another alternative is to find distress sales, or motivated property sellers (hard to do in the HOT, hot markets) who MUST sell and buy the properties at a WHOLESALE below market sales price or create some financing with the seller that allows for the property and its debt service payments to cash flow (the creative use of “paper” financing techniques)
There is a saying that says; “Don’t buy any property for a price that would be greater than what your tennants can afford to pay in rent…” - in other words AVOID negative cash flow for long term rental investment property investments.
Best to your success;
Michael Morrongiello
Author of the Unity of Real Estate & “paper” study course