So you think a rental
duplex is something you want to invest in. Well this is a short and concise
guide of some things to consider. Duplexes are great investments but with any
investment you need to do your due diligence and be honest with your
capabilities.
Step #1 : Scope out the Market Area.
Where do you want to
invest in? It’s a simple question but with layers. Ask yourself the following:
·
What are the local tax
rates?
·
Would i be comfortable
collecting rents?
·
Would i want to live
here even temporarily?
·
Is the area growing?
Step #2 : Do your Financial Homework.
Before you search for
duplex listings, you need to know where you stand financially. There are ways
to creatively finance any property but if this is going to be your first
investment property, base your buying ability on more traditional methods. Some
variables to sort out:
·
Get Your Credit Score
·
Determine Your Max
Down Payment
·
Determine your Cash
Reserve
·
Look at local Rental
Rates
Your credit score is
your a lender’s measure of how fit your are as a borrower. Whatever the
imperfections to this system, it is a core component to getting attractive
interest rates. Get a 3 Bureau credit score and see what each one scores you
at. If you have a low score, you may want to boost that number and invest when
you can get a better rate.
Figure you out your
max down payment and see if you can afford the cash outlay starting at your
base price range. Make sure you accurately determine what the minimum down
payment for duplexes in your projected area areWith any investment property,
numbers tell the story. Find vacancy and credit lose rates in the area you want
to buy. If you experience that rate of vacancy or worse, will your cash reserve
allow you to pay your mortgage?
Estimating the vacancy
rates are important but so are the local rental rates. This rental income rate
should be based on recent history and should be the average rate. There are
outliers in rental income in any market, but base your estimate on conservative
rent figures.
Step #3 : Get your Duplex Mortgage Options.
Call and get rates.
Duplexes are considered Multi-Family 2 but still considered residential real
estate so financing is similar to a single family home. The major financing
difference depends if you are going to be a owner occupant or a pure landlord.
The other variable to ask about is if a lender will take into the consideration
the potential rental income on the property.
·
If you are a
“unseasoned” investor, they may give your potential rental income zero
consideration and will simply finance you based on your ability pay the whole
mortgage with your current financial means.
·
If you are a
“seasoned” investor then they may take into consideration a certain percentage
of potential rental income. Almost no lender will speculate 100% occupancy,
most likely it will be somewhere near 75% from a lender’s perspective. What
percentage also relates to your owner occupancy status on the property.
The down payment on
the property is affected by your owner occupancy. For example a lender may
allow 10% down if your are buying as a owner occupant and want 20% down if you
are a buying as pure investment property.
One thing you will
want to ask any lender is what the occupancy period is before you can leave the
property as an owner occupant and turn that unit into a rental. It may be
a year, it may be more. Verify this outside of your lender per your state
rules.
Step #4 : Have a Tenant Marketing Plan.
Once you know your
financing options, think about your duplex marketing plan. How do you intend to
get a renter? Ask other investors what works, and research what publications or
methods that are used most often in your market area. Then define your plan.
Step #5 : Duplex Shop and Narrow Possibilities.
With the assistance of
a real estate broker or agent look at several options that meet your criteria.
Look at the core functionality of the property and get a home inspection on
your top prospects.
So if you are looking
to buy new duplex or looking for a rented duplex visit Allindiayellowpage.com to get complete information about your dream
new duplex and villas in your area.