And we are back! With our special “First Time Investors!” A step-by-step guide to entering the world of real estate investments – buying real estate for income, and long-term wealth.
And right now, we’re going to talk about one of the most common ways people all across America start investing in real estate.
And that is – when they buy a new house – they keep the old one – and rent it out. It makes sense. Because you know your current house pretty well. You know the mortgage, you know the utilities, you know the taxes. Think about it! You know its history, you know its operating costs, the neighborhood, the schools – you know that place inside-out.
And if you understand what you’re investing in, chances are you’ll make informed decisions, every step of the way.
How about you? Have you ever thought about keeping the house you own….when you buy your next place?
It happens a lot! And the result is, you are now a bona-fide real estate investor, and your investment is something you completely understand. That – is some strong peace of mind.
So let’s look at how you can make that happen. In this hour we’ll talk about the steps you’ll need to take before you do it! And in our next hour, we’ll talk about actually becoming a landlord!
First of all, talk to your REALTOR®. Find out what kind of rental income you might be able to bring in, on your house. That’s an important first step, because you’ll need to know how much money that house will generate!
Ideally, you will bring in enough rent to cover the bills. The mortgage. The taxes. The insurance. The condo, or HOA fees.
Now – if the rent isn’t enough? Don’t let that stop you! Talk to your financial advisor and your accountant about whether a small loss might be OK. Because in many cases the bills will stay the same over time, while the rent increases every year! So if it take a few years to get out of the red and into the black? It might be ok. But talk it through with your financial advisors.
Next, you will need some capital to make it happen. Because if you keep the first house, you won’t be able to use its equity for the down payment on your next place. You’ll have to buy your next home with a cash down payment, so you’ll need some serious money available to start with.
But say you have that money. And you find your next house – and you do have the resources to buy it – and rent out the house you live in now.
Well, that’s great. But make sure you talk it through with your lender. Because in addition to having enough cash to buy your new house, you’ll need enough income – to support both houses, and both mortgages. You see, lenders aren’t that willing to just grant you ‘rental income’ when they consider you for a loan. Chances are, you’ll have to show that even without any rental income, you can still afford both houses.
OK? Now if you’re still good – then you’ll want to have a talk with your financial advisor and your accountant. Because when you start renting out that house – you lose some tax deductions – while gaining others. Make sure you know exactly what will happen to your tax bill, and your financial picture, when you become a landlord.
I know. It sounds like a lot of work. But remember, if you do it, you will now own TWO houses….you’ll have two huge investments.
So you want to go into it with your eyes wide open, and knowing all the facts. So talk it through with your REALTOR®, your lender, your financial planner and your accountant. See what they say. And if you end up with a green light? Well done.
You’ll now own two homes. Ready to become a landlord?
We’ll cover that – in the next hour of our special show “How to Invest in Real Estate!” Right here – on Real Estate Today!