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Buying And Financing A Rental Home

By Jeffery A. Hammerberg

With property values rising, and the economy continuing to turn more and more people into home-renters instead of home-buyers, now is a fantastic time to purchase a rental home and become a landlord.
Higher rents, added equity with each passing month and a slew of qualified renters to choose from equal success.
Like any business, starting a rental property business has start-up costs involved. If you have solid credit and a nest-egg you can put toward a down payment, are organized enough to handle the details of leases, deposits, maintenance and repairs…, it's a great side business.
To purchase a home as a simple rental property, you'll have to plan on a 25 percent down payment. As a Non-Owner Occupant (NOO) your costs on a mortgage are slightly higher than they would be as an owner occupant. With current loan rates, you can likely get a 4.5 precent 30-year loan.
Of course if you have the flexibility, you can buy as an Owner Occupant (OO) with as little as 3.5 percent down. To qualify as an OO you need to actually live in the property as your principle residence for at least 24 months. Check with your mortgage lender to determine the amount of time you need to live in the home before you can rent it. You will be purchasing this home as your personal residence, so it makes for a good first investment property.
With getting started in the rental game, these costs and fees can be daunting. What can you do if you're unable to purchase it as an owner occupant? Find a property that already has renters living in the home. You're going to face the fees involved in a "non-owner occupant" purchase, but you can help in the loan process by showing instant income from the existing tenants. They can help offset down-payments with their first month's rent and deposit, and you won't have any "lag time" between purchase and your first month's worth of payments.
Purchasing a home as a rental property involves a great deal of preparing, paperwork, and financial investment, but the added income you'll see will make it more than worth your while as long as you plan carefully before diving in.

For expert advice on buying your first rental home or condominium, contact any of the top gay realtors at http://GayRealEstate.com and find Michigan specific listings in our Michigan Pride Source Yellow Pages Real Estate category.

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