And by “investor,” I’m talking about your neighbor, the “average Joe.” Buying real estate for income is not just for the super wealthy any more.
For example, Ricky said, “I bought an REO for $120,000 which had previously sold for $320,000 in Northern California. Put $26K down, financed $94K at 5% on a 30 year fixed mortgage, payment is $515 and rent is $1,300/mo.”
“We’ve seen some pretty dramatic trends as of late in the market ,” said MBA Vice President of Commercial/Multifamily Research Jamie Woodwell, speaking to a conference about the increase of buying single family homes as rentals.
12% of American households are living in a rented house.
55% of American household are living in a house they own (or are buying).
Who Rents and Who Buys?
The largest group of renters are age 25 to 35. Then the race to own a home begins. Those in the age bracket 35 to 55 are quickly moving into home ownership. They’re looking at the future and realizing they don’t want to pay for someone else’s mortgage forever.
“You’ll Always Need a Home,” said Suze Orman.
People who don’t opt to buy will be renting; and that is exactly why more people are buying a second house, to fill that need.
Mortgage Requirements to Buy an Investment Property
A quick summary of basic requirements for a mortgage on a non-owner occupied home:
* Down payment of at least 20%. But 25% gets you a significantly better interest rate.
* Six months’ reserves in savings (so you’re prepared for months without a renter).
* Excellent credit, usually a 740 score. Below 740 will cost you a higher interest rate.
A Word of Caution
Before buying a rental property, carefully consider the “rent-ability” of the property, your own financial stability, and your own tolerance for risk. It is wise to consult with a financial adviser. In addition, make sure the loan officer you choose is experienced in doing non-owner occupied loans. You don’t need a newbie making mistakes during your loan process as they learn the ropes for this type of mortgage.
Source of statistics: Origination Pro