Re: Anyone here who earns a living via flipping?
Down payments on investment properties are minimum 20% for non occupant owners. With residential properties, the mortgage approval is not contingent on projected income, it’s pretty much the same as if you’re buying for owner occupancy: credit, debt to income ratio, 3 years of tax returns etc. When doing your due diligence though, while considering a property for potential investment, after factoring in your expenses (mortgage/tax/insurance, property manager fees if you’re going to use one, maintenance incidentals) you want to have a 8-10% cap for it to be worth it.
So how I got started was buying our first “starter” home about a year after we got married. Poor, post college grads lol, we early on made the decision that we would always budget our expenses based on his income solely, so instead of a nice shiny new build with all the bells and whistles we went with a slightly preowned in a outlying suburb which we figured would be easy to rent out some day. We started with a crappy 80/15 loan (put 5% down) but then refied about 7 years later and again 3 years after that when rates were at historic lows (3.2%) so that set the stage for investment portfolio. After the twins were born, we bought a new build townhouse for our first legit rental property. That was 20% down and was also had two notes on it but once I started earning decent money we quickly paid off the second lien and refinanced the first and were then into the 10% cap rate on it. When it came time to upgrade to a bigger house, we had a crapload of equity in the starter home but instead of selling and putting all that money towards a down payment on a much bigger McMansion that would need two full time incomes to sustain, we figured it do better to put renters in there since there was only about 5-6 years left to pay that off. So that added investment prop #2](http://www.paklinks.com/gs/usertag.php?do=list&action=hash&hash=2) . When my mother passed away, my siblings and I inherited 2 of her rentals homes. One sibling wasn’t interested in keeping her share so I bought her out. We are in the process of selling both off right now as Dallas is a total sellers market and property values have sky rocketed so I’m looking to make a tidy sum. To give you an example of the long term projections, my first house that we bought in 2000, was for $127,500, the market value on that home today is $205,000. On one my Ammi’s rental homes that is under contract right now, when we were considering selling in 2010 the appraisal on it was $183,000…the appraisal on the same property that I just got back 2 days ago is now $248,000.
So the key in residential property investing is to really, really know your market.
I want to add to our investment portfolio but inventory is at an all time low here, especially with the starter family homes <200K, (thank you foreign and out of state cash buyers) so I’m switching my focus to multi family units like a 4 or 8 plex near one the college campuses. Student housing is always easy to rent out, and you don’t have to spend a boat load in fancy upgrades to get decent rent. The loan approval on a multi family unit is a little more complicated, so we’ll see how that goes.
I’m currently working with 2 out of state investors (California) who are buying investment properties not only here in Texas, but in Michigan as well. Because of the explosion of growth in our area (thank you Toyota & Liberty Mutual!!) it’s proving a tad bit harder to find something in the more settled and populated suburbs, but the good thing about the DFW area is that people aren’t afraid to move to outlying areas so we’re now looking a bit further North then originally intended.
I just realized how much I rambled on and on lol, feel free to message me for more info or any specific q’s.