Author Topic: Looking to Buy Our First Investment Property  (Read 2921 times)

onecoolcat

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Looking to Buy Our First Investment Property
« on: February 08, 2015, 09:33:44 PM »
My wife and I have started talking about buying an investment property in Central Florida.  We are maxing our retirement accounts and have just a little bit left over and we are thinking a house we can rent out could be a better investment then opening taxable accounts.  We currently own a townhouse in South Florida outright, our homestead, but are looking in Central Florida near my family because property is much more affordable there.  We are looking to put maybe 25k down and want to get something for under 125k (want to avoid PMI on a conventional loan).  Obviously, I need to talk to a bank about getting a loan, but I suspect we could get approved for 150k at 4%.   

I thought it would be a great idea to do investment properties in the area since my mom was a realtor in the area for over a decade, my dad has worked in construction his entire life, the wife works in insurance, and I occasionally do evictions as an attorney.  However, it turns out my mom doesn't know any realtors in the industry and my dad is too old to do any moderate to heavy construction.  So I don't really know where to start in terms of finding good investment properties.  I'm thinking I should find a realtor and let them know what i'm looking for.  I looked on Trulia.com and things seem affordable in the area.  Anyone have any tips for a first time investment property shopper?

LiveLean

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Re: Looking to Buy Our First Investment Property
« Reply #1 on: February 09, 2015, 06:28:14 AM »
1. Buy only in areas you know well, preferably close to where you live now. Not only are you more likely to get a great deal because of your knowledge, but you'll be nearby when management issues arise -- even if you have a management company. (I bought my first investment property last year 800 miles away, but in the area where I grew up.)

2. Since you live in Florida, you know the two biggest expenses, higher than in most parts of the country, are property tax (because we have no state income tax), and insurance (since we have hurricanes every decade or so, and even though most parts of Florida have not been hit by a hurricane in forever, as opposed to much of the NE, we still pay outrageous homeowners insurance). So be sure to factor in those two big expenses when considering a rental/investment property.

3. No Realtor is ever going to be as knowledgeable as you are. Seriously. Sure, they might live in the area and been selling homes there forever, but they just want to make a sale and they're not going to look at it objectively as a business. I got my real estate license 14 years ago, not because I ever wanted to sell real estate (and I haven't), but because I was so frustrated by idiot Realtors, I wanted to understand the process better. Even when I finally bought a second home/vacation rental/investment property last year, it was from a Realtor I like a lot, but a guy who hated the property and didn't want to show it to me. He has since admitted I got the best value in the area in the last decade.

waltworks

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Re: Looking to Buy Our First Investment Property
« Reply #2 on: February 09, 2015, 09:03:24 AM »
The fact that you didn't even mention rent, expected costs, etc says to me that you should probably just fund your taxable accounts.

-W

onecoolcat

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Re: Looking to Buy Our First Investment Property
« Reply #3 on: February 09, 2015, 11:16:12 AM »
The fact that you didn't even mention rent, expected costs, etc says to me that you should probably just fund your taxable accounts.

-W

Expected mortgage = $600
Tax = $200
Insurance = $100
Expected rent = $1300
Expected profit on top = $400 (not considering expected and unexpected repairs)

Anyways, I just talked with a credit union and they said I would have to put 50% down and take out a 15 year loan since its an investment property.  Rate would have been 3.8% fixed.  We don't have 50% to put down so we will either have to talk to other banks or put it off. 

arebelspy

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Re: Looking to Buy Our First Investment Property
« Reply #4 on: February 09, 2015, 11:37:51 AM »
Talk to a real bank that sells the loan to fannie/freddie.  You shouldn't have to put more than 20-25% down.*



*That does not necessarily mean that you should.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

waltworks

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Re: Looking to Buy Our First Investment Property
« Reply #5 on: February 09, 2015, 11:51:49 AM »
Ok, what do you expect for vacancy/maintenance/upkeep. If managing yourself, how much time do you think you'll put in, and what do you want to pay yourself?

The numbers you have are pretty mediocre - you'll be pulling negligible returns even with pretty optimistic assumptions on vacancy and repair, and paying yourself nothing.

I am now posting this thread on every single rental question thread as standard policy:
http://forum.mrmoneymustache.com/real-estate-and-landlording/examples-of-rentals-you-own-that-perform-well-financially/

-W

The fact that you didn't even mention rent, expected costs, etc says to me that you should probably just fund your taxable accounts.

-W

Expected mortgage = $600
Tax = $200
Insurance = $100
Expected rent = $1300
Expected profit on top = $400 (not considering expected and unexpected repairs)

Anyways, I just talked with a credit union and they said I would have to put 50% down and take out a 15 year loan since its an investment property.  Rate would have been 3.8% fixed.  We don't have 50% to put down so we will either have to talk to other banks or put it off.

onecoolcat

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Re: Looking to Buy Our First Investment Property
« Reply #6 on: February 09, 2015, 01:58:38 PM »
The main goal would be for the rent money to pay off the mortgage.  We would take a lesser rent amount in exchange for a good tenant, that would actually be ideal.  This area is residential so I don't think it would be a terrible assumption to think the hardest part is getting the initial tenant as they will probably stick around a bit. 

waltworks

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Re: Looking to Buy Our First Investment Property
« Reply #7 on: February 09, 2015, 02:32:03 PM »
I am not trying to be a dick here but: from the way you are posing these questions it is very clear you have not done your homework. Go read. A lot. Just read every thread on this forum for the last couple of months, and follow some of the links people post. Pay special attention to "1% rule" and "50% rule" discussions. That will be a pretty decent start.

-W