I have many questions about this.
Post away!
1. Are lenders looking for how much liquid money I have before letting me buy a home for rental purposes?
2. Is it better to live in the future rental house for a while? I noticed my neighbor lived in his house for a week or two. I presume this was to get a better mortgage rate? Is that likely?
3. Any suggestions for books?
4. Is it crazy to buy a rental home in a high COL area like DC? My main question here is how would I even make money?
5. How much does one advise I have on hand to pay for repairs, bad tenants, etc? (In the event I even need it.)
1. They want to see that you have the down payment in an account seasoned (2 mo typically). Once you're past 4 properties they typically also want 6 mo. PITI reserves for each property, including the new one.
2. If you buy it as owner occupied, you need to live there. Getting an owner occupied loan knowing you will turn it into an investment loan and living there a week and moving is fraud. Typically the number I see to be more comfortable is at least a
year. I don't bother, I just get investment loans. The rate is a bit higher.
3. Yes, lots. Search the forums for real estate book recommendations, there have been several threads about it. A good beginners book I typically recommend is Building Wealth One House at a Time by John Schuab. It gives a good overview of owning rental properties, and then I have other book recommendations from there.
4. Probably. You'd be speculating on appreciation, and likely losing money every month (negative cash flow).
5. Amount of reserves needed depends on the property, your situation (i.e. if you cash flow lots from a stable job and can pay the mortgage even when it's vacant, you're in a bit more comfortable position than someone living paycheck to paycheck in a company that's going through layoffs). Either way you probably want some reserves, but it depends on the situation.