Advice Needed - First Timer
Hi! My husband and I are getting ready to start investing in real estate and become landlords (my parents had rental property for 30 years and recently just sold it all - unfortunately, not to us!).
Nevertheless, we are interested in very low-priced properties ($20K and under) with existing tenancy and good returns ($100 clear per property per month), in my opinion.
Here is my question(s)...
1. Can we require renter's insurance (properties are located in Kansas)?
How about direct deposit of rent?
2. How hard (ie expensive, time-consuming) is it to go ahead and purchase properties as individuals and then transfer to corp, as soon as we can get corp set up?
3. We have about $25K in cash to deal with and are thinking about using it as the "20% down" on several properties just to eliminate PMI on the loans and maybe get lower interest rates. Is this smart? I know that the interest rates on these "small" loans will be more than on "bigger" loans, so....?????
4. Anyone in the Kansas City area that would like to recommend a good real estate attorney?
We are thinking that we'll purchase with the idea of being landlords in the beginning and possibly offer tenants the option to purchase sometime in the future. I would almost be okay with allowing the tenants to purchase for just a little more than their already paying in rent (with nothing or next to nothing down) and hopefully, have them take better care of the property as it would be "theirs" AND save on maintenance as that would be their responsiblity as well, but I don't feel comfortable doing that until we get corp set up. Comments? Suggestions? Advice?
Word of advice.... low end purchase...low end tenants
renters insurance... let the renter oay and require in the rental or lease agreement.. your blowing your profits
automatic deposit... what till you have some properties under your belt
if you got that kind of cash Inc. now
you can do it for under $750 online "the company corporation" ...incororate.com
20% down theory is good...not investor wise in my book... little to no down...stay liquid....
Always lease option in my book.."non-refundable" deposits make it short term 1yr with renew right if you want .... when you renew..collect more non-refundable deposit and raise the rent
Thanks for the input!
PMI isn't going to be that much on these "low-end" properties, but we're just looking at ways to increase our profit each month. I guess we'll have to look at interest rates, as well.
Hoping to incorporate by the end of the month. Have targeted a couple of properties, but am trying to decide whether to go through real estate agent or find out who owner is and deal directly (may be able to save some money there since they'll be saving commission).
Hey,
I have never dealt with houses in this price range, so I may be off base.
But is this realistic?
1) Can you get low interest mortgages on $20k properties? I just did some refinance and I had could NOT go below $60k without a big bump in the interest rate.
2) As the tenants are in the property, are they currently paying rent that would allow you to NET $100 a month? That has to include all of your expenses, repairs, and vacancies.
3) As the properties are occupied, I have to presume they are in good condition. You are looking at 30% return ($100/$4000 x 12). In my experience, that would be unheard of in rental houses that are in good condition.
4) In my experience, low rents equals questionable tenants. Are the existing deposits high enough to cover any repairs that would be needed?
1. yes, your lease can and should require renter's insurance.
2. you can write your offer on a property as taking possession as "corporation to be formed." that way, you can get the corporate entity formed once you have a firm deal in escrow. subsequently selling the property (especially a very low priced one like this) as an individual to the corporation will likely kill your yield given the transfer taxes.
3. i am not sure on properties this low priced, but typically you can get 5% down on a single family residence, and a 15% second or line of equity. that lets your first be the required 80% so you don't have to pay PMI. this can boost your cash-on-cash yield significantly if the property is profitable enough to exceed the interest rate you are paying on the first/second.
if you are looking for a high return... check to see if your city offers section 8... it's a government program that pays a little bit more than current rent rates. they will even locate tenants for you...
[addsig]