As a mortgage professional and real estate investor I continue to be amazed at the buying opportunities in today's market. Rates are at historic lows and real estate values have declined in some cases 25-35%. It is more affordable to buy housing today than it has been in the past 25 years.
As a real estate investor I bought my first property in 2000. Interest rates were in the low 6% range and the housing market was starting to show potential growth. I liked rentals because they are leveraged assets and the opportunity to appreciate that asset was 8-10% per year. Yet, as mortgage lending continued to get more aggressive more renters pursued buying a home and my investment business proved to be choppy throughout the past decade.
As the mortgage market offered loans to every potential buyer good tenants continued to become hard to find and I found myself vacant for several months at a time.
Fast forward to today and we find millions of previous home owners into foreclosure. Many of those families would prefer to find single family housing as opposed to going back to apartment style living. In many cases they make much better tenants because they have an appreciation for the upkeep of your rental.
Rental real estate can now provide positive cash flow and the potential for appreciation as our market will some day move out of stagnant growth.
$100,000 purchase with 20% down
$80,000 loan at 4.5% 30 yr term
$405.35 principal and interest
$165.00 property tax payments
$155.00 town home association or insurance
$ 20.00 additional insurance policy
$745.35 full payment
$1,000.00 Probable rent for 2 br town home
254.65 Monthly Cash Flow
Lenders have firmed up guidelines for those interested in rental real estate for the first time. They now require 20% down payments, 6 months liquid reserves in your bank account, and if you are a first time investor you will need to be able to carry the new housing payment within your current housing and credit debts. You will not be able to off set the expense of the rental for your first property from an underwriting perspective until you've shown a history of ownership on your most recent Federal tax return.
Today's rental environment shows demand for quality housing. With an over supply of families looking for quality housing, it could be the perfect time to invest in rental real estate.
If you'd like to discuss opportunities you can find me at 612-282-5863, visit my web site at www.brianparkinson.com, facebook at Brian Parkinson, mortgage banker at RMG
