Naturally, people are nervous about making financial changes during a recession. But, refinancing your existing house to take down payment money out of your equity and buy a rental house is one of the safest ways to start investing in real estate. It’s the most common way that real estate investors use to purchase investment properties.
If you have a steady job and a good credit rating, now is a rare opportunity to get a loan in the 4% interest range. And, houses are selling at fire sale prices!
It’s a good idea to refinance a house that you have owned for a few years before reinancing to take some equity out of it.
Refinancing an existing property for downpayment money is a lot better than waiting until you have enough cash to purchase a rental house withouta loan. Having a loan gives you leverage, because you don’t have to use all of your own money, which could take 20 years or more, to save.
The great benefit is, after you have purchased your rental house, is that you have a stream of income that is in addition to your regular 8:00 to 5:00 job.
You can be laid off, or fired from your regular job, but you can never lose your rental property job!
Before the show I heard Ron going through the news and he said that ratings were so bad at CBS that Katie Couric was showing up to work in sweat pants, a tank top and a ball cap too.
So, during the interview, I mentioned that one of the advantages of working with rental properties was, like Katie Couric, I can show up to work in sweat pants and a ball cap.
A good question came up today during my radio interview with Dave Kebler of WRNJ Radio in Hackettstown, New Jersey.
I was asked if it was now impossible to get a loan, either to refinance a house or to purchase a fixer upper rental house.
The answer is no, it is not impossible to get a loan. Granted, it requires more paperwork and squeaky clean credit, but loan money is still available and at great 4.5% rates for 30 year loans. I have taken out 3 loans in the last 12 months.
Is it worth it to take out loans for investment properties?
The economy is still as flat as Rush Limbaugh’s trampoline, but there has never been a better time to invest. From the perspective of mortgage interest rates and low real estate prices, this is a time of great opportunity.
When I was a Peace Corps Volunteer in Central America, people would ask me if the streets of American were paved with gold. I said, they’re not paved with gold, but they are paved with opportunity. And they still are.
Upcoming radio interviews
Aug. 11, 8:10 am, Mark Wayne show, WICH 1310 am, Norwich, Connecticut.
August 17, 6:50 am, Jason Mansmith show, WRPN 1600 am, Ripon, Wisconsin.
August 20, 8:30 am, I will be on David Sutton’s show, KSRN 1490 am, Los Alamos, New Mexico.
August 25 at 8:08 am, I will be on Jeff Anderson’s show, KSDR 1480 am, Watertown, South Dakota.
I was watching the movie Australia last night, starring Nicole Kidman and Hugh Jackman. It was such a classic tale that it sent chills down my back.
A man starts up a small cattle empire in the outback of Australia. He is killed and his inexperienced wife has to take over the operation. She’s in way over her head, but in order to save the ranch she has to drive the herd thousands of miles to the market. She asks her ranch hand to lead to trail drive.
The tough ranch hand assembles a rag tag group, which include of a drunk, two aboriginal women, a young boy, and the wife, to herd the cattle. Despite stampedes, poisoned watering holes, and other travails, they keep moving on.
We are what we are
Before the trip begins,the ranch hand addresses his team and goes over the “dos and don’ts” of working a cattle drive.
At the end of his speech he says, “Well, we are what we are.”
He said it with some degree of exasperation at having to use vastly unqualified people on the drive.
But, I also thought that he said it with a sense optimistic determination. As if he is saying, “This is all I have to work with. Its not as good as it could be, but I’m going to make it work and we’ll get these cattle to market.”
You don’t have all the experience that you might want to begin, but you don’t let that stop you. There’s a lot to learn and you learn as you go. Your determination gets you over a lot of obstacles.
Upcoming Radio Interviews
August 20, 8:30 am, I will be on David Sutton’s show, KSRN 1490 am, Los Alamos, New Mexico.
August 25 at 8:08 am, I will be on Jeff Anderson’s show, KSDR 1480 am, Watertown, South Dakota.
Owning rental houses far exceeds the benefit of the pension that you may receive from your job. I worked for the state of Arizona for 13 years, and I will one day receive a pension of around $1,000 a month.
But, does that really provide security?
Each year the value of my pension will go down because it is not tied to inflation. So, after 10 years I’ll still receive $1,000 a month but because of inflation, it may be actually only worth $100 dollars a month because the cost of my groceries, my clothes, health care, and other costs have all gone up each year.
Rental houses provide a better pension. If I get $1,000 a month in rent profits, it not only keeps up with inflation, but it exceeds inflation.
Which pension program would your rather have? One that increases in value with the passing years, or one that decreases in value?
1. Place several small For Rent signs on all nearby streets, especially the major intersections. If you get a sign with an arrow on it, you can point the arrow in the direction of your house. I buy the signs at Home Depot or Lowe’s.
2. Hold an “open house” on Saturday and Sunday. People driving by can come in and look around.
3. Contact companies that help people find rental properties. Some will list your property for free. These companies usually contact me.
4. Run an ad on craigslist.org. You can upload photos and describe the qualities of your rental property. The ads are free & I usually get a great response.
I hope you find a tenant soon.
Let me know if you come up with a good technique that I haven’t thought of.
Good luck!
Best regards,
Terry Sprouse
Location, Location, …
One thing I didn’t mention in the letter, but which is perhaps the most important consideration of all in attracting good tenants, is the location of your property. Properties located where people really like to rent are called “opportunity zones” (or “transition zones”). Just as Baskin-Robbins must offer the flavors of ice cream that the public likes, so you must offer rental properties in the areas of town where people want to live.
If your property is located in an area where people don’t like to rent, you will always have trouble finding tenants. For more information about my philosophy on where to invest, check out my EzineArticles.com article The Secret to Increasing Cash Flow – Invest in Opportunity Zones .
Here are the final numbers on the rental property that I purchased.
Price: $106,000
Interest rate: 5.125%
Term: 30 years
Down payment: $21,200
Principal & Interest: $457.37
Taxes & Insurance: $128.87
Total monthly payment: $586.24
Estimated rent: $770
The townhouse is 1100 sq.ft., 2 beds & 2 baths, washer, dryer, carport, and small back yard. It has a great central location and should rent easily. I have another property nearby that is very easy to rent.
It needs some cleanup and repair work in the kitchen, fire alarms, blinds in the windows, new toilet sets, etc. There is nothing big that we have to do to it. With my wife and kids pitching in, we should have it ready to go by the end of the weekend.
Here are a few more photos of the kitchen, the living room, and the back yard.
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