You don't have to spend six figures on an investment property in this market... you can buy properties for as little as 10K.
The Time is Ripe for Low Priced Properties
With all the foreclosures out there, the time is ripe to get into real estate investing. But please don't jump into a million dollar foreclosure just because it's listed for 600K -- even if you have four or five partners. Start with lower priced properties (the ones you can handle alone if your partners dip out and if you find yourself paying the mortgage for months because you have an empty house you can't even rent out).
Research, Research, Research
Visit websites like this one. This blog showcases properties in the Atlanta area under 50K, and gives invaluable insight into what payments would be on properties under 50K. (Tip: On a 10K mortgage, 30 years at 6%, your payments would be $59.96 per month -- that's less than sixty dollars per month! One you could probably carry while waiting on a sale or a good tenant! Bingo, that's the kind of deal you want as a new investor.)
Elbow Grease!
So the house may need a little work? With a low mortgage, you can do that. Also, buying low, you will have some equity in the property, so get a rehab loan, spend 25K, and fix the place up nicely so you can rent it out at a good monthly rate.
Raining Cheap Foreclosures!
You don't have to spend six figures on an investment property in this market. At last look on one of my favorite listing sites in the Atlanta, Georgia, area, there were 1,234 single family homes listed under 50K and 78 condos listed under 50K. See what I'm saying. You will have insurance (but, on one of my rentals, which is right at 100K, bought a few years back, the landlords policy is right at $50 per month; and, the taxes are less than a thousand per year).
Let's Peek at Some Figures
Math time: When you add in taxes and insurance on an investment purchase of a 3 bedroom, 2 bath home, that you've rehabbed, let's see what happens with the numbers. Say you purchased the home for 10K (not unrealistic, remember?); and you've gotten an additional rehab loan for 25K -- that's a total mortgage of 35K. Assume you've gotten a 6% loan for 30 years (you've refinanced and rolled the rehab loan into the mortgage). That's a mortgage payment of approximately $210 per month with the initial mortgage AND the rehab money.
Now, say you add in $50 per month for eventual landlord's insurance (it will be less!); and, you decide you want to pay your tax bill monthly (assume you're escrowing a $900 per year tax bill in with your mortgage payments)... you'd have a total outlay of approximately $335 per month. A good Section 8 rental (that's an article of a different fabric!) will easily yield you several hundred per month in "positive" cash flow, even with regular maintenance.
Low, Low, Low
So, the lesson is to simply buy low, low, low and to put in a little elbow grease. You can't go wrong buying low when you're just getting your feet wet in real estate investing.
Happy investing!
Blog by Cassandra Black, Lady Investor, Realtor, Business Owner, Author
The Cassandra Group RE
Foreclosure Cleanup, LLC
Real Estate Cleanup
Associated Content by Cassandra Black
Author of How to Start a Foreclosure Cleanup Business
Author of Pricing Guide for Foreclosure Cleaning & Real-Estate Service Businesses: How to Price Jobs for Profit eBook
Author of How to Invest in a Home for Under 10K and Have a $45 Per Month Mortgage Payment!
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