Buying Rental Properties

Investing in real estate can be a path to a lucrative future, but when you’re just starting out there are many things to consider to determine if this is the right course for you.

Buying Rental Properties
Investing in real estate can be a path to a lucrative future, but when you’re just starting out there are many things to consider to determine if this is the right course for you.

Many newbie investors think they’ll create overnight wealth. Often they forget to budget for miscellaneous expenses that can break the bank if they’re not prepared. Or worse, newcomers get stuck with properties they thought were going to be cash cows, but because they’re burdened with excessive maintenance needs, the properties end up only draining their pocketbooks.

Following a well-thought-out plan will help you in the real estate game. The first step is to have funds for a down payment, typically upwards of 10 percent. However, if you buy, say, a duplex and live in one-half of it you can qualify for better loans with less money down, even no down payment.

“For one to four units the loans are treated like a single-family residence. Whether it’s a duplex, triplex or a fourplex, you can virtually use the same type of loan. There is non-owner occupied and owner occupied. Most people go with owner occupied loans so they get the most beneficial rate,” says David Rosenfeld, owner of Advantage Real Estate in Santa Monica, California.

But when you’re first getting into real estate investment, is it better to buy a multi-unit or a single-family home?

“If people want to get into this market they have to have a plan and the plan is what do I want my money to do for me? If the answer is I don’t need a huge return now, but I want a big return later, then you get in and you try and find the lowest priced property, in the best neighborhood, in the best shape and you do the best you can with that formula,” says Rosenfeld.

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