I have a few questions regarding the risk borrowers face putting 5% down and then renting then property.
What is the real risk of buying at market prices with little down? In the event of potential future crashes/declines in RE prices, i suppose rent prices would come down, but if CF still paid expenses, couldnt you just hold the property until the market improves? If so, and your strategy is buy, hold, and rent long term, why wouldn't you want to be as leveraged as possible (assuming you are far from retirement age)?
These arent callable loans, so the bank cant call them back if RE prices drop (what happened to dave ramsey).
Are there requirements for banks to take any kind of action on regular conventional loans they service if there is a market crash and values dip below loan balances?
What am i missing when investors warn to not be over-leveraged?
Thanks in advance!
The banks aren't going to call your loan as long as you're making payments. The risk with just 5% down (in my opinion) is with you. There's not enough skin in the game so you're far more likely to walk away when the going gets tough.
Awesome thanks Nathan!