Call: (301)943-4370
Email: adambashein@gmail.com
www.basheinhomes.info
Most every time a person buys a home, one says to him or herself "the numbers have to work" or I can't go through with the purchase.
Home buyers, whether looking at a place as their potential home or investment property look at the property condition, what work needs to be done, what work they would like to do, can they afford the work and with the help of their realtor, the home is priced correctly based on the property condition or if they need to get a lower price for the purchase to make sense for them. (Yes, by all means, if you want, by all means try to negotiate on price, terms if the home is priced correctly, but also know the real estate market conditions in your neighborhood. But that is a for a different discussion.).
When the buyers are investors, if they are looking to purchase the home and keep it as a rental, they also need to calculate whether they will be adding value with the repairs, improvements and be able to rent the property for more money than they would in the property's current condition. If the property is move-in ready, than they don't have to calculate repairs and improvements. On the other hand, when buyers are looking to flip houses, they need to make sure after the repairs and renovations that they will be able to sell for a good margin.
The starting point is getting a loan approval for the potential purchase, knowing up to what price range you are approved for, what the interest rate and payment is with a few different loan options, so you know up front your purchasing power and what you potentially need to rent out the property for (if it is to keep the home as a rental and not flip it) in order to have a positive cash flow on the rental.
Interest rates for investment properties tend to be higher than interest rates for primary residences.
There are a couple ways to possibly get a lower rate for a loan on an investment property. These only apply for people who already own a home. Use a home equity loan or line of credit. Since rates on home equity may fluctuate, it might be safer to do this for a flip, because your intention is to repair and renovate the home as fast as possible and then sell it. So, fluctuating rates may not be as relevant to flippers since they, by definition aren't holding on to their homes.
If you are planning to hold the property as a long term rental, a home equity loan or line of credit is a move to consider if you are planning to refinance at a certain point, which is trying to predict what the future market interest rates will be in the future. Something else to consider if you are doing a home equity loan or line of credit is that you are using your current home as collateral. Some people are comfortable with this and others aren't. The right decision for some is the wrong decision for others.
The simple, traditional route, if you don't like risk is simply apply for a mortgage on an investment property, knowing the interest rates may be higher and taking that into account especially if you are looking to purchase a long term investment property (considering your cash flow every month after collecting rent, paying the mortgage, if you pay a property manager, any expenses).
As I am sharing these ideas, I defer to your lender, financial advisor for guidance on what the rates for the different financing options are and what, in their opinion, is the most are advantageous move for you.
Whether you or someone you know is thinking of buying/selling an investment property, a home, has a question about the real estate market or has a general question about real estate, please feel free to contact me. I always have time for and greatly appreciate your referrals.
Life is good!
Adam
adambashein@gmail.com
www.basheinhomes.info
Cell: (301)943-4370
Office: (301)921-4500 - ask for Adam
RE/MAX Realty Group
Information deemed to be accurate but not guaranteed
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