Residential Income Property Financing: Part 2 of 3

Welcome to the second segment of a three-part series about income property. In this second segment we will be discussing financing options for residential income properties as well as the upside (and downside) of owning this type of property.

Financial Concerns

Financing options for residential income property vary widely from commercial or industrial properties. For one thing, most private lenders place size requirements on the apartment complexes they are willing to finance, usually five units or more. Smaller complexes just don't have the revenue generation potential required to make your loan officer feel comfortable.

The good news is that residential income property loans usually carry a higher LTV ratio than other property types. If you recall from the first segment of this series, LTV (loan-to-value) ratio indicates the percentage of money your lender will lend you to the property's market value. An 80% LTV is the maximum most lenders will provide for residential income property.

Loan terms usually range from 25 to 30 years with a maximum loan amount of up to $3 million. Current competitive interest rates can range from 4.70% up to 6.625% depending on several factors including your credit rating and the size of your down payment.

Most loans for residential income property are termed as 'recourse loans'. This means that the lender has 'recourse' to your personal assets in the event you default on the loan. Needless to say, you need to make sure you are ready to assume the financial responsibility of making your payments in a timely fashion.

Managerial Challenges

Besides financial responsibility, residential income property management brings with it other unique challenges. Likewise, it demands certain skills above and beyond investment savvy and experience. To successfully manage your residential income property, you'll need a good combination of street smarts, interpersonal, and handyman skills.

More than any other income property type, residential property will bring you into close contact with those renting or leasing your property. Possibly the most important part is screening those you rent to. Background checks, calls to previous landlords, and searching interviews can save you a lot of headache and money down the road.

It's likely that at some point in the tenancy something will break or malfunction. If you have the ability to replace windows or wiring, know how to fix an A/C or refrigerator, or have rudimentary plumbing skills, chances are you will save some money by performing these tasks yourself.

Sometimes dealing with tenants can be the hardest part of owning residential income property. How well can you deal with angry, demanding people? Do you stay cool, calm, and collected in tense interpersonal situations? If so, you'll be prepared to deal with some of the issues likely to crop up during your management experience.

Conclusion

It's important to keep your goals in sight when managing a residential income property. Sometimes it's easy to get bogged down in the day-to-day duties of running the property that you lose sight of making a profit. Know your rights as a landlord; know your bottom line as an investor. As with any investment, having an accurate idea of your time horizon will, to a large extent, dictate the amount of effort and money you should put into your income property.

Cameron Brown is an internet marketer specializing in investment property. For more information about residential income property, please visit Security National Capital.

More than 40 states signed onto a proposed $25-billion deal with major mortgage servicers over faulty foreclosure practices. New York, Nevada and Delaware joined California in holding out for better terms.

More than 40 states signed onto a proposed $25-billion settlement with major mortgage servicers over faulty foreclosure procedures, but California, New York and other key states were still not among them.

California has until Monday to share in a multi-state deal with banks to obtain mortgage relief and reforms. Atty. Gen. Kamala Harris, who walked away from talks last year, says the door remains open.

With a Monday deadline at hand, California officials have resumed direct talks with the Obama administration about joining a multibillion-dollar, multi-state mortgage settlement with the nation's largest banks, a source said Sunday.

The talk show host pays $12 million for the 4,088-square-foot house with four bedrooms and four bathrooms. The ocean-view home sits on 1.26 bluff-top acres with beach access.

In one of the more talked-about transactions in town, actors Brad Pitt and Angelina Jolie have sold their Malibu beach house to daytime host and comedian Ellen De Generes for $12 million.

The four-bedroom, five-bathroom house built in 1920 for industrialist James Wigmore lists for $2,875,000.

A decorative cast stone entrance opens to this restored Spanish Colonial Revival-style house in Pasadena's South Orange Grove area. Built in 1920 for industrialist James Wigmore, the house retains such original details as coffered wood ceilings and arched doorways.

They don't believe they can sell their property for what it's worth, so they're spending money on making their homes more comfortable.

Do you fit any of these descriptions?

A biennial research report by the National Assn. of Realtors indicates that a handful of real estate agents and brokers and their clients either don't know the law or don't care to follow it.

When it comes to lawsuits, real estate agents and brokers tangle mostly among themselves.

The president aims to help about 3.5 million people with good credit who are unable to refinance at historically low rates because their homes are worth less than their mortgages.

 

The White House hopes to help millions of homeowners lower their monthly mortgage bill with a $5 billion to $10 billion plan to set up a streamlined refinancing program for people who are current on their payments.

The Standard & Poor's/Case-Shiller index of 20 large U.S. cities fell 1.3% in November from October as foreclosures continue to drag down the housing market.

Three straight months of home-price declines in the biggest U.S. cities showed that foreclosures remain a significant drag on a housing market that is entering its fifth year of deterioration.

L.A. Clipper Chris Paul may be quick down the court, but he moves pretty fast when it comes to buying multimillion-dollar real estate too.