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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: Real estate mogul concerned how Americans will deal with squatters: ‘Something really bad is going to happen’ Fox Business Prologis Warns of Slowing Industrial Real-Estate Market The Wall Street Journal Industrial property company warns of a slowing real estate market Greater Baton Rouge Business Report Real estate: where is the best place to live in Boston 2024 The Boston Globe Homes and land for sale Decker Real Estate Tillamook Headlight-Herald 2 real estate firms join forces for medical office building acquisitions Becker's ASC Review Big Tech Is Downsizing Workspace in Another Blow to Office Real Estate The Wall Street Journal Arizona Coyotes owner cares more about real estate than hockey The Arizona Republic People and Property: Real Estate and Construction News From Around NH New Hampshire Business Review Experienced Acquisitions Expert Justin Maturo Joins Mesirow Institutional Real Estate Direct Investments PR Newswire Real Estate Fresh Finds: April 17 PoPville VR Home Tours: The Future of Real Estate Showings hackernoon.com How Will Real Estate Commission Ruling Impact Bay-Region Homebuyers? Chesapeake Bay Magazine Real Estate Sales Down, Price per Foot Up, in March Brownwood News New York community-scale developer Ninedot secures US$13 million real estate financing Energy-Storage.news Flagship Communities Real Estate Investment Trust Announces Largest Acquisition in the REIT's History GlobeNewswire Friedman Real Estate closes sale of 12952-square-foot industrial property in Madison Heights – REJournals REjournals.com Consumer warning: real estate fraud schemes target Dominicans Brooklyn Daily Eagle Real estate, finance jobs are driving Tampa Bay's economy, report shows - Tampa Bay Business Journal The Business Journals SVN | J. Beard Real Estate Announces The Addition of Marshall Davidson As Chief Investment Officer Woodlands Online Leading Conference Organizer IMN Launches AI in Real Estate Conference on June 11 in New York City Yahoo Finance The Top Luxury Real Estate Leaders In Las Vegas Vegas | Modern Luxury On Real Estate: New York needs housing mandates to solve housing crisis Crain's New York Business A new real estate trend? Shopping malls converted into residential units in South Florida NBC 6 South Florida Parkside Uptown — Bank of America’s future Dallas home — finds $290 million The Dallas Morning News High Mortgage Rates Impact New Construction: Builders Pull Back Norada Real Estate Investments California Housing Market Slows Down but Home Prices Soar Norada Real Estate Investments Local real estate agents discuss how lawsuit may impact the market Daniel Island News Top residential real estate sales for April 1-5 in Longboat, Lido, St. Armands, Bird Key Your Observer Flat For Flip (FFF) Intends to Expand European Real Estate Market to Asian Buyers through NFTs GlobeNewswire Regional Banks Face Challenges from Commercial Real Estate Market Value the Markets The Top Luxury Real Estate Leaders In Philadelphia Philadelphia Style | Modern Luxury Ex-HGTV star and Los Gatos house flipper Charles 'Todd' Hill sentenced in real estate fraud case KGO-TV REAL ESTATE | Eaton's Pizza remodel underway at new location on Hwy 33 in West Bend, WI washingtoncountyinsider.com Fertitta buys properties near Post Oak Hotel, River Oaks District - Houston Business Journal Houston Business Journal Mortgage Rates Soar to Highest Level Since November Norada Real Estate Investments H-E-B buys land in Celina The Dallas Morning News |
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