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Residential Income Property Financing: Part 2 of 3
Welcome to the second segment of a three-part series about income property. In this second segment we will be discussing financing options for residential income properties as well as the upside (and downside) of owning this type of property. Financial Concerns Financing options for residential income property vary widely from commercial or industrial properties. For one thing, most private lenders place size requirements on the apartment complexes they are willing to finance, usually five units or more. Smaller complexes just don't have the revenue generation potential required to make your loan officer feel comfortable. The good news is that residential income property loans usually carry a higher LTV ratio than other property types. If you recall from the first segment of this series, LTV (loan-to-value) ratio indicates the percentage of money your lender will lend you to the property's market value. An 80% LTV is the maximum most lenders will provide for residential income property. Loan terms usually range from 25 to 30 years with a maximum loan amount of up to $3 million. Current competitive interest rates can range from 4.70% up to 6.625% depending on several factors including your credit rating and the size of your down payment. Most loans for residential income property are termed as 'recourse loans'. This means that the lender has 'recourse' to your personal assets in the event you default on the loan. Needless to say, you need to make sure you are ready to assume the financial responsibility of making your payments in a timely fashion. Managerial Challenges Besides financial responsibility, residential income property management brings with it other unique challenges. Likewise, it demands certain skills above and beyond investment savvy and experience. To successfully manage your residential income property, you'll need a good combination of street smarts, interpersonal, and handyman skills. More than any other income property type, residential property will bring you into close contact with those renting or leasing your property. Possibly the most important part is screening those you rent to. Background checks, calls to previous landlords, and searching interviews can save you a lot of headache and money down the road. It's likely that at some point in the tenancy something will break or malfunction. If you have the ability to replace windows or wiring, know how to fix an A/C or refrigerator, or have rudimentary plumbing skills, chances are you will save some money by performing these tasks yourself. Sometimes dealing with tenants can be the hardest part of owning residential income property. How well can you deal with angry, demanding people? Do you stay cool, calm, and collected in tense interpersonal situations? If so, you'll be prepared to deal with some of the issues likely to crop up during your management experience. Conclusion It's important to keep your goals in sight when managing a residential income property. Sometimes it's easy to get bogged down in the day-to-day duties of running the property that you lose sight of making a profit. Know your rights as a landlord; know your bottom line as an investor. As with any investment, having an accurate idea of your time horizon will, to a large extent, dictate the amount of effort and money you should put into your income property. Cameron Brown is an internet marketer specializing in investment property. For more information about residential income property, please visit Security National Capital.
MORE RESOURCES: Rules that helped set real estate agent commissions are changing. Here's what you need to know The Associated Press Realtor Lawsuit Settlement Will Change the Housing Market Forever Business Insider The Realtors' Big Defeat The New York Times Why This Real-Estate Investor Favors Commercial Vs. Residential Business Insider Who are real estate lobbyists talking to in New York? City & State New York Public records: Coshocton County, Ohio, real estate transfers Coshocton Tribune Brockton-area real estate sales for Dec. 26 to Dec. 29, 2023. Enterprise News The End of the Super Broker Era in Commercial Real Estate Commercial Observer Landmark Settlement Breaks Up the Real Estate Cartel The American Prospect Real estate shake-up: Possible commission changes ahead 11Alive.com WXIA Real Estate Commissions Are About to Get Much Cheaper. Here's How Zillow, Redfin, and Opendoor Could Be Affected. The Motley Fool Wall Street's Most Accurate Analysts Say Hold These 3 Real Estate Stocks With Over 4% Dividend Yields Markets Insider On Real Estate: The confusing and contradictory state of post-pandemic retail Crain's New York Business Local real estate agents abuzz over proposed commission changes Central Penn Business Journal Miami Beach real estate investor under investigation for firing shotgun from waterfront home WSVN 7News | Miami News, Weather, Sports | Fort Lauderdale REAL ESTATE | New signage for Auto Safety Center on S. Main Street, West Bend, Wi washingtoncountyinsider.com Luxury's Latest Battleground: Real Estate | BoF The Business of Fashion A luxury agent on how the NAR settlement will change his business The Washington Post WORLD PROPERTY VENTURES: The 'DARPA of Real Estate' Announces New Digital Initiatives The World Property Journal Knoxville School Board to Hold Several Public Hearings Regarding Real Estate Parcels KNIA KRLS Radio Cities Face Cutbacks as Commercial Real Estate Prices Tumble The New York Times Realtor group will pay $418M to settle commission lawsuits The Associated Press Settlement will affect Iowa homebuyers KCCI Des Moines How new real estate rules may impact home prices in Connecticut Eyewitness News 3 Israeli real estate event: Legal complaints escalate NorthJersey.com China's Real-Estate Market Just Set a Record—but Not a Good One The Wall Street Journal Is the Era of the Celebrity Real Estate Agent Over? Industry Reacts to Settlement That Could Slash Commissions Hollywood Reporter What the death of the 6% real estate commission means in D-FW The Dallas Morning News Hocking County real estate transfers | News | logandaily.com Logan Daily News What Seattle-area homebuyers should expect after national settlement The Seattle Times National Association of Realtors Agrees to Slash Commissions to Settle Lawsuits - The New York Times Realtors Reckon With a Seismic Shift to How They Get Paid The Wall Street Journal Realtors settlement brings confusion, relief to Southern California’s real estate industry OCRegister Realtors Reach Settlement That Will Change How Americans Buy and Sell Homes The Wall Street Journal California, United States Luxury Real Estate Home California Listings Making Sense of New York's Confusing Luxury Home Market The Wall Street Journal How KC-area brokerages rank by CRE category: industrial, office, multifamily - Kansas City Business Journal The Business Journals A commission settlement may affect housing market 9News.com KUSA End of 6% real estate commissions could mean lower home prices The Atlanta Journal Constitution A Look Into the Future of Home Buyers' Agent Commissions The Wall Street Journal National Association of Realtors to cut commissions to settle lawsuits. Here's the financial impact. CBS News Once America's Hottest Housing Market, Austin Is Running in Reverse The Wall Street Journal Chicago Voters Face Choice on Tax to Fund Homeless Programs The New York Times Yoon to scrap 'reckless' plan to raise declared real estate value The Korea JoongAng Daily Wilmington realtor weighs in on proposed changes to real estate industry following major settlement WECT Blackstone, World's Top Alternative Asset Manager, Eyes Record Highs Amid Real Estate Bottom Investor's Business Daily Bridgemarq Real Estate Services (TSE:BRE) Share Price Passes Above Two Hundred Day Moving Average of $12.93 Defense World 4 Ways a Settlement Could Change the Housing Industry The New York Times Revolutionizing Real Estate Lead Generation: Stephen Zochowski's Groundbreaking New Book 24-7 Press Release Colony Ridge violated deceptive trade practices, Texas says The Texas Tribune Real Estate Stocks Drop As NAR Agrees to $418 Million Settlement Markets Insider Real Estate Credit Investments (LON:RECI) Shares Pass Below 200 Day Moving Average of $126.75 Defense World |
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