Mtg City
Inner-city rental property investment advice.?
I am considering buying a 5 unit inner city property for $36k. I currently rent myself. I have $5k to put towards closing costs and a down payment. With all units full the rental income would equal $2250. The PITI pmnt would be approx $650. With this math, the property would have to maintain less than a 40% occupancy rate to maintain itself. At full occupancy, the property would pay for itself AND pay my rent or a future mtg pmnt of my own.
Does anyone think I should use my $5k to buy a single family home of my own first??
I think you are on the right track. This type of investment will give you future income as well as a good tax write off. You are investing your 5K wisely. In years to come you will thank yourself for doing this.
You might want to check the units prior to closing and make this a part of your purchase contract. Make sure the units are up to city and county code.
The thing you have to remember is that a 5 unit income producing property will not qualify as a single family house in the residential mortgage market.
1-4 units are considered the same as purchasing a single family home. You get the same qualifying requirements and interest rate. You might also qualify for a FHA loan buying 1-4 units.
You would have to consider a commercial mortgage for your purchase.
You might stay in one of the units this might lower the interest rate as now it is an owner occupied property. The lenders think you are less likely to leave if you stay there in the property itself.
Your tax write off would be on the 4 rental units. Your interest would be 100% written off as well as the county and any possible city taxes.
You should contact your tax consultant about any tax questions or information.
You might stay there until you have built up a little equity after which you might want to do the same thing again, buy a 1-4 unit investment to live in.
When and if you purchase this inner-city rental make sure that you maintain and keep your property in better condition than any other on the block.
If someone paint graffitti on your place have someone immediatley remove it. Make sure your landscapping is done on a weekly basis and your up keep on the maintenance is done.
You might consider joining the Apartment House Association. They can help with getting credit reports on your potential tenants. They could have certain forms you might need in your business as a landlord.
I hope this has been of some use to you, good luck.
“FIGHT ON”
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