Thanks for checking out the Real Estate Today podcast. We continue our series on Cash Flow Properties. Today we talk about how to get into real estate investment.
Bob: I’m Bob Nelson, real estate investor and broker with Pacwest Real Estate Investment. In our last presentation I dealt with a purpose of investing. For most of us, had we’ve chosen real estate for the purpose of generating cash flow vehicle it would support our retirement. We’re not depending on the government. We’re not depending on other resources that we have very little control over. We’ve chosen something that we can change on a daily basis. The objective is to forego a certain amount of your current income in order to place it into an investment that will ripen into an income producing vehicle for future cash flow.
Now ultimately you will probably want to own it free and clear on retirement, if there’s a way of doing it. For those of you that think that’s heresy, fine. You’re doing your own thing and I’m sure it’s working for you. The concept is, if I can cover the down payment and get a loan that allows me to purchase the property the tenant’s going to pay for the rest of the property for me. The tenant will make a payment that will cover the property taxes, property insurance, maintenance and repair, the management so I don’t even have to do it myself and the mortgage payment. Again, if you can cover the down payment and you do it right, that’s our target.
It’s a great time to secure long-term mortgage financing, an exceptionally low interest rate that you can … For most they’ll contract with you for a period for up to 10 years. Same interest rate for a period of 10 year. After that it becomes probably a variable rate loan, or the loan may be called. That’s okay, that’s fine. 10 years get you a long way in this process. I would strongly recommend that you pre-qualify with a mortgage lender. Simply go and talk to a mortgage lender and say, “Hey what am I qualified to borrow? Here’s the income that I have. Here’s my asset base.” … In other words my net worth. “What would you feel comfortable in lending me as I go out and purchase property?”
Once you’ve identified that, now you know what your purchasing capacity would be. Most rental properties require a substantial amount of hands on tenant management. Not property management, the property’s fine. It’s the tenants that require a degree of management. A big mistake for a number of people is they buy the property and they also but a property management job. Someone’s got to do it, but it doesn’t have to be you. You can hire a professional that would take care of that for you.
I’m Bob Nelson, Real Estate Investor and Broker with Pacwest Real Estate Investment.
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