Paying Market Value?
As a newbie looking to buy second rental property (single family home).....is there anything wrong with paying market value/seller's asking price if I see a modest cashflow? I was just wondering if I should try harder to get properties at a discount so I could start with equity?
Buying for cash flow and appreciation are legitimate reasons to invest in a property. Just make sure your numbers are in line with appropriate expenses figured in correctly.
Nothing wrong with it, but the question that begs asking is WHY would you want to do it? I guarantee that wherever you are in the country you can find properties that will either give you cash back or instant equity.
I would never pay retail for an investment property. I would rather spend a smart dollar than just a dollar.
[addsig]
I bought a rental house (2 unit) at close to market value. The price was not that good but...There was a positive cash flow of about $350 a month after expenses. Money out of pocket was also very little. The financing was very good. First mortgage at 85%LTV at 6% interest with no PMI. A second mortgage with the seller of 10K at 8% (Total LTV of 96%). I put 4% down and had closing costs of less than $2k (local bank). I could have a 95 or 100 % LTV loan at a higher interest rate with closing costs much higher and monthly payments the same or more as my current loan, but a better retail price as I would have more power to haggle over price with a cash deal. I chose close o FMV.