Get a Loan To Buy Property?

Discussion in 'Buying & Selling Real Estate' started by Rainman, Jan 18, 2015.

  1. owesem75

    owesem75 Well-Known Member

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    I will never... ever.. get a loan to buy a property. It would be one of riskiest investment move that I will make if ever I did that. But NEVER.
     
  2. Flexin

    Flexin Member

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    If your friend isn't in a great financial position then they won't get approved for the loan anyway. But I don't think it is a bad idea at all. I know a lot of people that have multiple rental properties and I don't know any of them that paid cash.

    If they are buying a place that is already an apartment and not being converted into one then they might have people renting right now that want to stay. They need to make sure they have some money set a side for any possible repairs. Look the place over well and have someone do an inspection on it. Even if everything looks good, things could fail the day after you buy it. Water heater, appliances and so on.

    If they find the right place for the right price, it can be a great investment.

    James
     
  3. My401K

    My401K Well-Known Member

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    Usually a loan will need some sort of collateral, and in this case it will probably be the property. It is easier then you think to get a tenant to rent space if the property is nice and the cost is within an acceptable range. The hard part is having enough money to pay for any repairs or needs that could arise. I have seen people buy investment property and not do their due diligence only to find out after a closing that there are some very expensive structural issues that need to be addressed. Another common pitfall is going and renovating a property to make it luxury in an area that is far from luxury, you never get the return you would think.

    Interest would be the least of my worry if the loan is a mortgage or equity backed loan, if it is from a credit card or something like that you might find that the interest rate is insurmountable. Investment properties are not a bad idea, it just takes a degree of finesse to make it all work. It is a learning curve, rather then a building with multiple units why not consider a duplex or single home? Even a retail space could work well.
     
  4. shilpa123

    shilpa123 Banned

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    I do not think it is a wonderful idea to take loan buy a property. It can be quite bad at sometimes. I do believe one should be very careful in this matter.
     
  5. crimsonghost747

    crimsonghost747 Senior Investor

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    You know, this is the #1 reason as to why I've never bought an investment property. Apart from taking the time to manage it, I absolutely hate the fact that something such as a broken pipe, some fault in the roof etc. can easily cost you the rental income of a year or more. I very much love the idea of investing in real estate but I do it only through REITs, makes it simple and these property damages don't really have any noticeable effect.
     
  6. Fredrick Jones

    Fredrick Jones Well-Known Member

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    He has to do his maths, and he also has to calculate what occupancy rate he needs to have to make loan payments. He has to also include the cost of maintance and taxes in his expenses also. It is difficult to calculate maintance costs, and if he has to hire repairment it can be really expensive. If he is able to do his own repairs and maintance it will make the appartment much more viable. The problem is when you hire other people to do maitance they can take advantage of you.
     
  7. Peninha

    Peninha Senior Investor

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    This is risky business, but if we have faith we can have it permanently rent we can indeed make serious money, it's a good investment for sure.
     
  8. wander_n_wonder

    wander_n_wonder Guest

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    I think it depends on the viability of the area where the property is. That's the first thing I will consider. I will do my research in terms of how quickly homes or apartments get rented. If it's a good area and my confidence that I will get tenants right away is high, then I don't need to worry if I don't have other investments.

    Overall though, I also don't believe in not having any backup plan. Given the economy these days, it's very difficult to make any huge financial risks. I will still make sre I have other sources of income or at least I have another business which I can turn to during hard times.
     

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