The number of homes being foreclosed has stabilized for the most part across the U.S.,
but that doesn’t mean everyone is interested or even able to buy a home just
yet. In fact, most people are still looking to rent homes because of the
high downpayments required by most lenders. For real estate investors, this
presents a great opportunity for them to purchase rental properties while
knowing they are in demand.
The reason that rental properties are such a great investment is because you
can charge renters more than the actual mortgage. For example, you can charge
renters $600 even though the mortgage is only $500 a month. You can use that
extra money to cover the mortgage in the event that no one lives in the home
You have to pay
closing costs when you buy a home. The amount of closing cost can vary
greatly, depending on the sale price. Closing costs are not included in your
loan, and you may end up spending thousands of dollars. Closing costs can also
reduce your profit. Even though the buyer typically pays the closing costs, you
could get the seller to pay. One disadvantage of this is that you may not be
able to get a deal on the house.
You also have the option of changing your loan size. If you request a larger
loan, you can use that extra money to pay the closing costs. However, it is
important to note that the bank may not approve everyone for a loan that is
higher than the price of the house.
Unless you’re a trained professional, your best bet is to seek assistance,
or at least advice from insiders in the know. There are legal services out
there, for example, that will give you face-to-face counsel about everything
from mortgage banking to foreclosure and bankruptcy proceedings. Check
on Linkedin.com for more info.
While purchasing rental homes can be a great investment, it is always a good
idea to see if you can’t avoid paying high closing costs. Not only will they
hurt your profit, but they can also make closing on a home more difficult if
you don’t have a couple extra thousand dollars on hand. So before you
buy, negotiate to see if you can get out of paying closing costs. If the
seller is desperate, there is a good chance they will pay the closing costs
allowing you to get a great rental property without additional high costs.