How to buy an investment property
How I did it: In 2005 my husband and I purchased a townhome, with an interest-only 5/6 ARM. Well, we should have known better to take that sort of loan, but we were in it, too, to make money, thinking it would be perfect to sell at the end of the the ARM and make a killing. Um...you all know how to market went. And even though we are renting to my mom and sis, which has worked out okay, they may be moving out soon, which means we have to find new renters. Not sure about that one....renting to strangers...In this market, it would be tough to sell, and it would be at a loss. Oh, and don't forget the fact that you're a LANDLORD. It's very annoying when my mom and sis call to say the a/c isn't working, and I'm the one responsible for getting it fixed. A $1,000 isn't cheap.......Definitely a way to build wealth, but know what you're getting into before you buy.
Lessons & tips:
- Be clear about the type of mortage you're getting. I would recommend a 30-yr fixed. If you can't afford the payments on a 30-yr fixed, it means you can't afford the mortgage. Find something cheaper.
- Have a cash reserve for things like broken a/c units, exterminators (for mice!).
- If you're renting to family, be sure to get a lease and collect a deposit. Many rules change when you're leasing to family.
Resources: Be sure to use a real estate agent when you purchase, so that you have a professionals opinion to run things by.
