Buying Investment Property…
You Don’t Have to be Wealthy to Cash in on Real Estate Investing
A simple answer is, "A million dollars would be nice", but only a handful of people would actually qualify. Instead, let's look at the other end of the line. What if you have NO money to invest…zero cash?
First of all, we need to understand the economics of no money down investing. Granted, many investment guru's have made a killing giving seminars and selling books and tapes on how to do it, but the majority of them do exactly what they intended to do…sell seminars, books and tapes. As for the would be "no money down" investor, he or she is left with some expensive materials that may or may not work and many unanswered questions that are vital to their success.
So, part one of successful real estate investing, with or without cash down payments, is to know what you are doing. If you know nothing about real estate investing, don't jump into a property simply because the seller will let you in without any cash.
Assuming you have followed the advise in previous issues, you already know this and have taken the necessary steps to learn the right way to invest. Let's concentrate on the "no money down" concept of real estate investing.
Second, we need to discuss a few facts:
No money down purchases, probably are NOT! Keep one basic fact in mind. Somewhere, somehow, you are going to have to pay for that property. If you purchase a $100,000 property with no cash down, you are going to have mortgage payments on a $100,000 mortgage. There is one more factor to consider… closing costs. These could amount to five percent of the purchase price, or in our example, an additional $5,000. Where does that money come from? Maybe you can borrow $105,000 to buy the property and include the closing costs in the mortgage. Your monthly mortgage payment just increased a little more.
A 100% leveraged property, at least in the first year or two, will not bring in enough income to carry itself. You will have to feed it to keep it running. (More cash needed).
Before you even consider buying a property you need to do two things: First, examine the property, the rental rates for it and the area in general, and the neighborhood in general. This holds true for any type of investment, apartments, office buildings, shopping centers, industrial buildings, etc. You want to know everything you can about the property, the area and the current rental rates for similar properties. You want to know how vacancies are in other properties.
For more information about Medley Landmarks or any of our investment properties, please contact us.