The Mortgage Go To Guy!!

With the current state of the national and local economies and the decline of the real estate market throughout the state, many home buyers are thinking that now is the time to pick up that first rental property that will lead them to financial freedom and wealth for their retirements.

Unfortunately for most, the fundamentals of real estate investment need to be re-explained because it will not only affect their ability to make money in the long run with a rental, but will also affect their short term ability to actually qualify to get a mortgage on the first property.

The lesson I will try to explain is buy smart, not cheap.

What is cheap in this market anyway?

Buyer - “I’ve found a property that was listed at $600K and it is down to $450K so I have got to have it!!”

Me - “Well, perhaps it is only worth $450K now and the $600K is what the sellers originally believed it was worth in the height of the market… and now with financial problems they’ve come down to Earth??”

The image of a distressed seller often captivates the novice investor. The huge price reduction just has to mean a great deal.

The proof of the value of the investment is actually found by the appraiser. Most of the time, the number isn’t that far off of fair market value…

• So if it isn’t a “steal” then is it still a good value? Maybe
• If it isn’t a “steal” will it still appreciate? all property appreciates eventually due to scarcity
• If it isn’t a “steal” should I just walk away? why? because something at 10% off is a better investment?? prove it!

That’s where the REAL investors separate themselves from the novices…

Real investments must cash flow. That means there must be some profit left above the costs every month. The rent should be greater than the mortgage payments plus all other expenses including taxes, insurance, maintenance and homeowners association.

This is also important to lenders… they want to know that you’re not going to be losing money every month and have trouble paying them.

If you can get into a great property and make money in the longer term, that is great… but if it stretches you too far every month, then is it truly a smart decision?

So when you start thinking about purchasing an investment property, take the time to sit down with a Real Estate Investment specialist and an investment savvy Mortgage Professional and make sure the property fits your needs and makes financial sense for you now and into the future.

More Real Estate Industry News You Can Use from
David A. Podgursky, MBA
The Mortgage Go To Guy!
Your Source for Residential and Commercial Mortgage Loans in Florida

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