Hi All,
I have been looking into getting some rental properties but obviously don’t know much about how to get an income property. I have a few questions about the process and actually have a property that I am looking at.

1.Where is the best place to start looking for financing?

2.What are the current interest rates for income properties? My credit is between 700- 750.

3.Will I definitely need 20% down in order for the bank to even consider lending for for an income property?

4.How can you quickly evaluate what the property is worth without having to hire an appraiser? I understand that this is a skill learned through experience, but how do I
get started?

5.I am in Denver, CO right now but I am from a rural town in southern Colorado. There is a property in my home town that sits on 0.73 acres and has two trailers on it (see description below from realtor) one is rented right now and gets $350/month (built in 1967) in rent and I believe I could get about $400-$450/month for the newer trailer (built in 1998). I am particularly interested in this property because it is already set up with two trailers. They are asking $75,000 but I am not sure how to evaluate the value. I was thinking of appraising the land and the trailers separately to determine the value. I tried Zillow.com but it doesn’t have any information.

6.Is there a free “blue book” for trailers available on the internet somewhere?

7.What is the best way to estimate value of land?

8.If you have experience can you give me your opinions on the property? It is 412 & 416 Barthelson Street, 81141. The MLS ID# is 643132

I hope that I am not asking too much but I really appreciate any help that you are able to provide. Thank you.

20% gross yield??

That's a great deal !!!

Best in my country (NZ) is like 7-8% yield right now.

Phillip,

I'm going to be a bit hard on your but it's only to help you out.

You are not ready to invest in real estate. Why? Because if you are asking questions like #1 and #2, you've got a lot of research to do.

Take some time, read some more books, and educate yourself more. Otherwise, you are really going to get burned.

With this said I will tell you that sites like Bankrate.com will give you the current rates. Where to get financing? Start with your bank.

Walk away from the property you are looking at and hit the books more. You'll save yourself a lot of money.

Good luck and I wish you the best.

---

Alton
http://altondawsey.tumblr.com/

Best? The seller. 2nd: private investors
Worst: banks

Why? With a seller you and seller can make almost any terms you can agree to...a boat for the down payment, a vacant lot near yosemite, etc. With a private investor (not hard money) you can set the terms and they can agree, negotiate or decline.



Banks and the credit industry will put a limit on your number of loans, so if you're buying to hold, you'll probably hit that wall at 4 units/loans.

There are ways around it - using some kind of entity for each property. Using seller financing and private financing... and others.



In this market? You can buy with nothing down in my market as long as you're not dealing with banks or realtors on properties with no equity using subject-to, wrap mortgages, lease options, etc.

If you're investing, you're supposed to be buying below market to begin with. Most rehabbers are paying as little as 25-65% on the dollar of FMV, rehabbing and re-selling at 80% of FMV - wholesalers are supposed to plan on offering 65% and re-selling (not rehabbing) at 75% - leaving a good deal for their buyer. I think these percentages are too close for comfort - with all the inventory still held off the market - I think the prices will keep coming down and those percentages will hurt.

The best book on the basic techniques is Robert Allen's Nothing Down. I particularly like the first one as being the easiest to understand, but if you can't find either the 1981 or 1985 versions, you might try his Nothing Down for the 90's or 2000's or whatever they're called. The earlier ones are far better.



Look at everything. Right now it's hard. Watch the solds - our paper publishes these once a week. It may or may not give you an idea of values or of discounts. The appraisers (as well as zillow.com, trulia.com, cyberhomes.com or epraisal.com) can't keep up with changes either when the market is dropping or when it's appreciating at a fast clip.



If you're not planning on living there, evaluate it on an income basis - this is how commercial property is evaluated. Trailer1 brings in $350/mo = 4200/yr; Trailer2: you didn't say what the other one rents for. Remember to pay for what you're getting, not for what it will return AFTER you buy it and either raise the rents or rent out vacant units. Don't pay the seller for your work and ingenuity.

Check out Robert Shemin's or a couple of other authors' commercial real estate books. Mine are in storage, so I can't give you exact names.

Consider this: a 12 unit apartment building, bank owned; 65% rented (below market rents); bank is diligently evicting the current tenants so it can deliver it vacant to buyer. Oddly enough, it hasn't sold in over a year and they finally dropped the price from $399,000 to $199,000.

Imagine that. Remember that income property is valued based on the income. If you raise the income by some amount (say $100/mo) and you're using a 10% return (or 10% cap rate) you raise the value by the increase divided by the return. $100 x 12 = $1,200/yr divided by a 10% (=.1) $1,200/.1= $12,000 increase in value. Instant equity. That's what Robert was talking about when he talked about creating money out of thin air. Alternatively, lowering the rent and income (i.e. evicting the current tenants) lowers the value of the property. Gotta wonder about the banks sanity. Maybe that's why this particular bank was taken over by Uncle Sam.



Comps (similar sold properties) in the area - they should be similar in size, use and terrain and closeby (i.e. a one acre gold mine is likely worth a whole lot more than one acre of grazing land without water).



Now your inexperience is showing. If you had a good deal, you might have given it away to someone else by posting it. What's the saying? Play your cards close to your vest.

Good luck,

Mary Cronin
mcronin at me.com