How long should I wait to buy an investment property?

I'm 23 years old with really bad credit. I have lots of late payments two repo's and a bankruptcy that went through in Janurary. I was lucky to get financed for a 2004 ford explorer with $2000 down and $315.00 a month which I am still paying on time. This is a breif summary of my situation. based in this would it be possible to get financed for a home? I am looking at buying in Camdon Arkensas. There are lots of homes from $9000-400,000. I want to start small homes, 10,000-40,000; fixem up and rent them out. Is this a good plan?

You will probably have to wait for 12 months from that dimissal of your debt. to get proper financing. You will need a credit score of at least 580 to get a loan

I'm a beginning investor myself. I would strongly suggest that you start out buying, fixing, and selling for a profit. Build up some cash, pay down some debt and then start holding some properties. Maybe even buy, fix and flip one, buy, fix and hold the next and so on....

The banks will want to see that you have some reserves built up for repairs and vacancies.

Hope that helps. Above all...do your homework and have exit strategies or contingency plans....the old Captain Kirk style of thinking.

How to value a property for investment during market downturn?

Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.

Let's use following example:

Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.

If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.

In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.

It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.

Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.

It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.

One may ask, why is there a discrepancy between two perspectives of the buyer and owner?

The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.


This article is teaching buyer how to lowballing.
http://biz.yahoo.com/brn/060909/19463.ht...

These two describe current market.
http://money.cnn.com/2006/09/08/real_est...
http://money.cnn.com/2006/09/05/real_est...

Yes and no.

Your interest rate will be very high, you would have to ask the bank what kind of rate they would give you or how much money they would request as down payment. The high interest rate would really effect your internal rate of return and net present value of the property but that would only matter if you had a targeted rate of return. So the best thing to do would be to go to the bank and see what kind of rate and down payment they would require and then make your decision.