OfflineA few concerns of mine:
In order to "cash flow" a rental property with a mortgage, the mortgage must be no less than 20-30 years depending on the amount borrowed against the property. Assuming the amount is six figures, to cash flow, the loan would undoubtedly have to be at least 30 years just to make the payment small enough to allow a renter to pay rent equal to or higher than monthly loan payment. Some banks have a minimum they will loan in terms of years based on the amount of borrowed. They won't loan 10K for 30 years or none that I have located at this point.
According to some banks and institutions I've looked into, their terms stipulate loans of up to 60-80% LTV (loan to value). To make this a "no money down" transaction, when purchasing and financing this property, the total cost of the transaction must be less than the LTV. Otherwise, the bank or institution requires 20% down. Again, depending on the loan amount, may only loan for a maximum of 5 years and no longer based on the amount borrowed.
For those of you who are carrying a mortgage on your property, what are the terms? Were they "no money down" with 100% financing? What institutions are you using to fund your properties?
If and when a tenant does not pay rent, the bank still gets their money regardless. What have you done in this scenario? The eviction process takes just a few days to several weeks depending on your state laws with regards to tenant/landlord rights. During which time, your bank payment never stops. Finding good tenants is not an issue, but this can and will come up while being a landlord. How have you handled this situation?
The other area of my concern is Debt To Income Ratio. Once you have surpassed this level, the bank will not loan any more regardless of the equity in the property. So, how is it that anyone can mortgage so many properties with so much debt and little income to justify the debt? Furthermore, if it has been shown that you have been financing 100% with zero money down, is the bank not frowning upon this with the more transactions you perform? How are you getting around this? How are you financing these rental properties? Is there no limit as to how many properties the bank will finance? Is this not a repeat of why the current real estate market as well as the economy is the way it is because people were borrowing more than they could afford?
I look forward reading to your response to my concerns.
When responding, please stay on topic, Thanks!
Does anyone have any input on these valid concerns?
Has no one any input? Are these not valid concerns?
A few concerns of mine:
In order to "cash flow" a rental property with a mortgage, the mortgage must be no less than 20-30 years depending on the amount borrowed against the property. Assuming the amount is six figures, to cash flow, the loan would undoubtedly have to be at least 30 years just to make the payment small enough to allow a renter to pay rent equal to or higher than monthly loan payment. Some banks have a minimum they will loan in terms of years based on the amount of borrowed. They won't loan 10K for 30 years or none that I have located at this point.
***1) BANKS - keep looking for commercial lending banks...even if outside of your area. If you have the numbers to support the note, you'll get the loan. The tricl is to have the following: the right business for that location, and a credit worthy tenant.******
According to some banks and institutions I've looked into, their terms stipulate loans of up to 60-80% LTV (loan to value). To make this a "no money down" transaction, when purchasing and financing this property, the total cost of the transaction must be less than the LTV. Otherwise, the bank or institution requires 20% down. Again, depending on the loan amount, may only loan for a maximum of 5 years and no longer based on the amount borrowed.
For those of you who are carrying a mortgage on your property, what are the terms? Were they "no money down" with 100% financing? What institutions are you using to fund your properties?
*****2) OK partner, you're on the right track...BUT you need to work the numbers backwards...what will be my "net" be in order for me to have the following:
a) Net Income ( income to pay note and taxes) - Equals Gross Rent minus CAM( common area and maintenance)
That leads back to item number one....what will that location produce in rent, and is the tenant credit worthy( ie good pay)*********
If and when a tenant does not pay rent, the bank still gets their money regardless. What have you done in this scenario? The eviction process takes just a few days to several weeks depending on your state laws with regards to tenant/landlord rights. During which time, your bank payment never stops. Finding good tenants is not an issue, but this can and will come up while being a landlord. How have you handled this situation?
*******3) yup, the bank will have it's hand out every month for the money it has loaned to you. Sas, you can't control everything, that is life. but you work on what you CAN control...that is making a good lease, getting a good tenant, and doing your homework and that particular property( will it support that type of business). Once you've done that that odds are in your favor for success*******
The other area of my concern is Debt To Income Ratio. Once you have surpassed this level, the bank will not loan any more regardless of the equity in the property. So, how is it that anyone can mortgage so many properties with so much debt and little income to justify the debt? Furthermore, if it has been shown that you have been financing 100% with zero money down, is the bank not frowning upon this with the more transactions you perform? How are you getting around this? How are you financing these rental properties? Is there no limit as to how many properties the bank will finance? Is this not a repeat of why the current real estate market as well as the economy is the way it is because people were borrowing more than they could afford?
*****4) Good point- That is why the most important point in RE investing is not what you sell a property for, but rather what you PAID for it. This in turn allows you to have more borrowing power, more reserves from that borrowing power( in other words putting money in the acct to protect against the unknown. Remember, if you pay less, you have more leverage..then follow the rest...good location, good tenant,good lease..will help you succeed.*********
Hope this helps..good luck...
Deb
I look forward reading to your response to my concerns.
When responding, please stay on topic, Thanks!
Thanks for your kind reply.