Just getting started
I think I'm finally ready to move into a few rental homes near my house, and diversify my investments. Hopefully, there are people here with answers.
1) I am thinking of homes in the $125K range (homes are cheaper in the midwest, but this is still in the lower 15% of homes in my town), so that I can purchase more than one over the next 12 to 18 months. I think I should be able to get into 3, maybe 4, by then. Question -- my feeling is that lower range of homes is more appealing as rentals because a) more renters available that can afford the rent, b) allows more homes to be owned. Any experiences that can confirm or shoot down my assumption?
2) I found a nifty tool that calculates the ROI, Capitalization ration, and cash flow. Using assumed rental rates (more on that later), the first couple homes I'm looking at are negative cash flow before taxes, but positive cash flow after taxes. Is this the norm, or should I expect positive cash flows before taxes are considered? Even with the negative cash flow, it shows an ROI of >70%.
3) How do you get around the 20% down and higher interest rates required for financing rental properties? Do you simply lie and say these homes are for your primary residence? If you do that, can you still get a loan where you document your finances, or should you go for the no-doc loans?
4) How do you learn if a) the area is already a rental neighborhood (I would think that would be a good thing if there were more rentals around, right?), and how do you learn what the average rent you can charge is? Do you do it by square foot? Do you do it by home value?
5) Anyone ever have any luck getting the seller to finance all or part of the selling price? Not as in late night become a millionaire sense, but as a means to get the property sold? How do you structure the seller financed part? Interest rate at, above, or below the bank rates? How long a term should I expect?
Thanks.... I'm sure any answers received will make me think of new questions.