All Forum Posts by: Jonathan Lilly

A friend and I are looking to begin a rental property investment partnership. We have in excess of the 20% down payment for the loan between the two of us. I have spoken with a few banks regarding the financing of properties for this partnership, and they have all indicated that only 15-20 year financing is available for joint loans. However, they mentioned the loan term could be for the standard 30 years if we were to get the loan in a single person’s name only. Is this common practice? Also, how would this work from a partnership standpoint? Is it possible for the loan to be in one person’s name, but the business/property to be in both individual’s names? What is the best way for us to maintain joint ownership of the business, but still obtain 30 year mortgages? Any other tips/advice on this subject would be greatly appreciated! Thanks.

A friend and I are looking to start a rental property business. I have just started talking to banks about financing options for this business. From these discussions, a few questions have arose. Is it possible to finance properties for 30 years whenever a business partner is involved? The banks I have spoken with indicated business loans for partners can only be for either 15 or 20 years. Thanks in advance for the help.

I am a little confused about calculating return on investment. Is debt paydown counted towards return on investment? For example, lets say I buy a house for $10,000 down and make $1,000 after expenses and mortgage payments. Lets say the debt paydown on the loan adds up to another $1,000 for the year. Would the return on investment only be the $1,000 profit, $1,000/$10,000, or, would the return on investment be the $1,000 profit plus the $1,000 debt paydown, $2,000/$10,000? Thanks for the help....

Thanks for the input everyone, especially Tom; however, the responses have caused me to have another question. What would be considered an acceptable return on investment, after all expenses, of a rental property. Originally I was shooting for around 7%, or close to twice the interest rate, but from the responses, this number seems too low. I probably should have clarified earlier, but this will be a SFH rental property, and I was hoping for a inital yearly return on investment of 7%.

After putting the 20% down, I will still have enough cash reserves to cover any unforeseen problems. Also, the goal is to find a property which return a minimum of 7% per year on this downpayment. I was just trying to determine if it would even be worthwhile to look into other types of financing for a 20% down case.

At what point does it become necessary/beneficial to consider creative financing options? For my first SFH purchase I should have 20% to put down, so would it even be beneficial to consider a different type of financing then standard bank financing? Thanks for the help!

Hi. I work for a small Engineering firm where we have a Simple IRA plan. The maximum tax deductible contributions for this plan are $11,500 per year. I have always tried to contribute this amount every year, because, up to this point, I thought investing in the stock market was my only opportunity to invest for retirement. I also contribute this much so that I can deduct the maximum allowable from my income for tax purposes. Recently though, I have began to learn about the benefits of real estate investments. I plan on buying my first rental property in the next year; however, me saving so much for the IRA plan every year severly restricts the amount of money I can save for this property. My question is, should I start saving less in the company sponsored IRA plan to give me more funds to invest in real estate? Do you think the lost tax deductions from the decreased IRA contributions would be made up through the tax deductions from the investment property? Thanks in advance for the help!

Thanks for the help. I thought 2% seemed kind of high. I was using .8% originally, and that seemed sort of low. I think 10% vacancy seems pretty reasonable. I was using 25% before.

What is considered a reasonable expected return on investment for your first year in a property? What about for the following years?

Couple of quick questions here. First, in a book I read, it stated that on average, a landlord can get 1% of total property value in rent per month. However, in the ultimate beginners guide, it stated a landlord should receive around 2% per month. I know rents vary by market and location, but overall, which value seems more like a real world scenario.

Second, I noticed it is pretty common to use an 8% yearly vacancy rate. Is this pretty accurate for real world circumstances?

With all of the new regulations since the mortgage crisis, what kind of down payment is required for a conventional loan to buy your first investment property?