For those who are considering investing in real estate for the very first time, we understand there might very well be no shortage of anticipation. Yet if you’ve gotten this far no doubt you’re getting pretty serious about the concept of owning real estate and investing in private notes. And over the years, we’ve answered countless questions. Here are five of perhaps the most common queries we at Capstone get about hard money and real estate investing.
How much down payment do I need? That depends upon the type of property in which you’re investing the type of loan being applied for. For a conventional, long term 30 year fixed mortgage to buy a duplex, you can expect to put down at least 20% and as little as 5.0% should you decide to live in one of the units. With a hard money loan, you can expect a down payment of 30% of the as repaired value of the property with loan duration of 1-2 years, sometimes shorter.
What is considered an investment property? An investment property is so-called for two primary reasons. The first, as an investment, the property is expected to appreciate in value over time adding to the owner’s overall financial profile as well as providing a monthly cash flow. An investment property can be a residential property or a commercial venture such as a storage facility. Second, an investment property is one that is not occupied by the owner. A vacation home is generally not considered an investment property if the owners occupy the unit at regular intervals throughout the year even though the owner does rent the unit at times.
How do I know if a rental property will be a good investment? First, there are no guarantees but what you can do is make a solid determination based upon recent market data and expected market data based upon research. In its basic form, a property might be considered a good investment if the cost of ownership is lower than the income it generates as well as a reasonable expectation the property value will increase over time.
When do I start marketing the property, before or after the project has been repaired? You can start any time you want but you should start as soon as you decide to purchase and renovate an investment property. You don’t have to wait until the project has been completed and in many instances you’ll have an offer from a prospective buyer well before you have even finished the project. Don’t wait, market way ahead of time.
How do I find tenants? You should rely on your real estate agent to find tenants for you as well as manage the property. Unless you intend to quit your job and manage real estate full time, enlist the expertise of a real estate agent experienced in investment properties.