Good credit...low cash
I have good credit and low cash (7-8k). I am wondering what is the best way to acquire a property for the time being. The price range, if it matters, will most likely be in the 70-90k range. Also, how much do I need in "reserves" to cover the time it takes to get the property rented, clean thoroughly, cover any unexpected expenses, etc.? Any input will be greatly appreciated. Thanks, in advance.
Quote:I have good credit and low cash (7-8k). I am wondering what is the best way to acquire a property for the time being. The price range, if it matters, will most likely be in the 70-90k range. This is a question for the financing forum. Browse the other forums as well for techniques in acquiring property (or control of property) without using your own money. The foreclosure forum, Subject To forum, Tax Lien forum, and the Lease Options forum may give you ideas.
Quote:Also, how much do I need in "reserves" to cover the time it takes to get the property rented, clean thoroughly, cover any unexpected expenses, etc.? First, for the property you plan to acquire, itemize all the monthly bills you would have to pay with no tenants. Things like property taxes, insurance, utilities, etc. are all monthly costs of ownership.
Next, add up all the monthly expenses you would have for maintenance and upkeep for a vacant unit -- things like lawn care, snow removal, minor maintenance (light bulbs burn out even in vacant units), common area cleaning, professional property management, etc. Call these monthly costs your upkeep.
Thirdly, figure out your marketing and leasing costs. How will you advertise your vacant units for rental and how much will that cost monthly?
Fourth, figure your one time leasing costs. If you need a rental license, how much will that cost? If you have a lawyer draw up your lease agreements, how much will that cost? Will you pay leasing commissions to realtors who bring you tenants?
Now add your monthly debt service (P&I only) to the monthly costs of upkeep, ownership, and marketing. Multiply this total by the number of months of vacancy you might expect for your area (round partial months up to a full month). Add this result to your one time leasing costs and you have the "minimum" reserve amount you need on hand for your property. Multiply this minimum number by 125% to insure a good cushion for comfort.
Hope this helps.
[ Edited by DaveT on Date 06/04/2003 ]
Just remember "No Ventur No Gain"
