Newbie Looking To Purchase 1st Investment Property
Hi All,
I'm 22 years old and recently purchased my first house in Arizona after being relocated by my company. I sold my condo in California (which was probably dumb of me) to give me enough money for a down payment on the new house. Houses in my area are really shooting up in value and I'd like to considder buying another one for investment purposes. My questions are as follows:
1. I put $40k down on my new home, it has gone up in value approx $10K since I bought it. Does this mean I have the possibility of pulling out $50K for use towards another property? and if so, is this wise?
2. Supposing the above is possible and wise, what would be the best way to go about pulling the money out?
3. I recently got married, my wife does add some income, however buying another home would probably push us past the allowable debt-to-income ratio. Knowing the house is for investment purposes, will lenders look at the potential rental income and include it in our ratio?
4. Supposing all of this works out and we purchase investment property, do you recommend using a local property manager to handle all the rental details? Are they a good value for their services provided?
5. Lastly, most of the homes in my area are new construction. I have seen quite a few people buying the homes strictly for investment purposes. Keeping in mind that this is my idea also, does anyone have any specific objections to purchasing new construction homes for investment purposes vs. resale homes?
Sorry for all the basic questions, and thanks for any help in advance!
1) Was the $40k 20% of the homes value?
2) Second mortgage or refi, You will get more with refi but it also will cost you more.
3) Yes we will look at the rental income but only about 75% of the rental income will be concidered, you can also consider a commercial loan in that case we will not look at your debt-to-income ratio at all just at the propperties income but you will need about 25% - 30% down.
4) With only one property you are better of doing at your self if you are local.
5) New constraction is normaly priced on the high end of the market. They get more because it is new. Once you buy it it is not new anymore it's like buying a new car. What could be good is pre-constraction, in that case your help with cash fow may get you a good deal.
Dennis
2) I personally prefer a HELOC-Home Equity Line Of Credit. You can take out up to 105% LTV in some cases and it works like a credit card. That means if you don't use it, you don't pay for it. And it's revolving. Unlike a 2nd or refinance, you don't have to make payments on the 50 grand while you're looking for your next deal. Then if you flip a property, you can pay that line of credit off. PLUS, it's interest only for at least 5 years, which means lower payments obviously.
Good Luck.
2) I also recommend the line of credit. In reference to part 1) of your question, typically lines of credit are approved for 80% of the equity in your home.
5) Due to the fact that raw materials for construction cost more than ever before, I believe you are getting more house for your money if you purchase a property that is not just built.
Good luck - great questions...