Investment properties question, how do banks look at them? What is the best way to get into it?

Question

Im looking at a property that is 199,000 listed can probably get it down to 190,000. Makes 22,000 a year income. I can put down up to 25,000.

Answer 1

they want a solid return of income

sometimes 5X, sometimes 7X

Answer 2

investment properties r good since they will build your credit and will help you in the future with having equity as long as you pay the mortgage on time you will have a good solid investment that will pay off in the future

Answer 3

The climate (for investing) has changed.  Nowadays a bank will want to be sure that you have the experience to identify a good investment property, manage it and sell it profitably.  Which means if you do not have a track record of successful investments  it will be an uphill battle.  They will also be very careful to  assess whether or not you have sufficient working capital after the financing to make it all work out.   A deal which assumes prime rents and 100% occupancy and no reserve for major repairs is not going to fly.     The best way to get into it is to start small with a manageable deal that requires minimal financing and that has POSITIVE CASH FLOW FROM DAY 1.    A deal that assumes big profits when reselling at a higher price that you paid in less than 5 years is just fantasy.

Answer 4

If you are talking about like a house that you are going to rent out they won't care so much thats its an investment.  They will treat it like a regular loan (with slight differences) and do their appraisals and such but will make sure you can qualify for the loan excluding the rent (if you can get the place pre-rented they will give you credit for that income, otherwise not).

With apartment buildings and such they will look at the actual rents being generated plus your situation, and try to see if the place makes money and can be afforded and will make their loan decision based on that.

Think of it this way, all they really care about is getting paid back with interest.  If the numbers work, and you have the right insurance and pay all your bills (and it seems likely you will continue to do so) they will lend you the money.  If any problems come up and they think maybe you won't be able to pay them back for whatever reason (and this can't be fixed) they will cut and walk away.

Answer 5

most lenders now will only lend 75% of the value on a purchase --so the rest you come up with

Answer 6

Banks find that investors are much more likely to let a house get foreclosed than a home-owner occupant.  So the banks require a larger down payment, better credit and a higher interest.

Put up a large down payment, rent it for much more than the payment, pay the mortgage off as quickly as possible, never sell, live off the income (it will adjust with inflation unlike most investments).

Answer 7

The banks look at investment properties as trouble spots.  A landlord is probably 15 times more likely than an owner-occupant to default on his mortgage.  All is takes is for you to have a difficult time in your life to upset everything.  You will pay your home mortgage and not pay the rental.  That is the way the bank sees you.

You pay a premium for this.  If today's interest rate is6.5%, you will pay 7% or more.  You will put more money down.  The goal for us investors is to always put $38,000 down on a $190,000 property.  Everything works better. You are going to get slammed for your $25,000 down payment.

The life of a landlord is not bad.  It works for me.