Correct Mind Set For First Time Buyer?
Hi all,
I've spent the past 6 months reading real estate books and just recently stumpled across this site and have been reading the forums as well.
I would like to see if I am on the correct path of thinking for a first-time buyer, with excellent credit, and looking to buy a 2-3 unit mulit-family (living in one unit myself).
- I have selected a Realtor
- pre-approved for 300,000 with 0% down.
- About to begin looking.. keeping in mind the 100-10-1 philosophy.
- Market is tight, ideal town is ranging from 280,000+, neighboring town (adds traffic) 230,000+
- Goal is to live in this property for at least a year or two, keep it and move onto another investment property.
- I shouldn't be too concerned with ROI, but I want to make sure I have a postive-cashflow, using NOI.
Questions:
- What type of morgtage should I look to get? ARM? fixed-30? Keep in mind I want to keep this property as a rental..
-Is my thinking on track? (postive cashflow, NOI)
- I've read that rent should bring in about 1.2% of the price, any more comments on Pricing a property this way?
Thanks to all you reply in advance!
Is the loan you're pre-approved good for a duplex-triplex.
Questions:
- What type of morgtage should I look to get? ARM? fixed-30? Keep in mind I want to keep this property as a rental..
You mentioned moving on, to you intend to cash out refi this place and then buy another?
If you're looking just to sell in 2 yrs, my thought has become, why pay for 30 yr. money. Maybe a 3/1 arm or 5/1 arm.
If you want a more aggress aproach maybe a 1 yr arm, knowing you can tweak the rents annually.
-Is my thinking on track? (postive cashflow, NOI)
What that you're including all the costs in the cash flow calc.
- I've read that rent should bring in about 1.2% of the price, any more comments on Pricing a property this way?
Some just posted what's a good roi (?) forum forum that his target was 2%
Yes, the pre-approval is for a duplex-triplex (owner occupied). I do not intend to sell the property, but to keep it and build my portfolio.
Another concern I have is the real estate market in my area has over priced properties (possible correction is near?), mortgage rates are slowly climbing, and rent rates are declining...
Is this a bad time to buy? Is there a right time to buy? Does buying in the 1st quarter have pros/cons to buying in the 4th quarter, or any other quarter?
If you're thinking of this mulit as a long-term hold, then it only makes sense to get a 30 yr. fixed.
Sure rates have been climbing, but they're still at historic lows.
Locking in a multi at 6% for 30 years is pretty damn good.
As for the relationship between bubbles, renters and interest rates, here's my take:
First off, the rental market isn't getting soft, it's been soft for the last three years. When rates dipped below 7%, it jumpstarted a buying frenzy and capsized the rental ship for landlords.
50% vacancy rates in Massachusetts.
Ouch!
Conversely, when rates edge back above the 7% line, i feel the renters will return.
Simple REI math: if you can't buy, you have to rent. In other words, when buyers are priced out because of rising interest rates, they'll have little choice but to rent.
In the meantime, I've lowered my rents to compete. Which is fine because I know it's only temporary. I'm just weathering the storm. And if you have trouble attracting tenants, I suggest you do the same. Lower your rents with the hope a better market in a year or so.
Then you can gouge. We all can! (kidding)
As for the forecasted bursting of the RE bubble, if it happens, I think it will be relatively painless. And certain markets will fare better than others. I think coastal areas, like Portsmouth and Boston, will always retain their value (give or take a few percentage points). But frankly, I don't buy the bursting bubble theory.
Four years ago, I was in the same positon you are: looking to buy my first multi and fearful of the bursting bubble. Everyone warned me that I should wait until prices come down.
If I'd listened, I'd still be waiting.
Good luck.
[addsig]