Zero Money Down?

[nickrizz]

I am a college student who really loves real estate and wants to get involved and start buying. I've read books and am saving as much money as i can. I live near NYC in New Jersey and the prices of buildings around here are very high. My question is i have heard a lot about no money down on appartments and foreclosures. Is it possible? Some people tell me you cant get a mortgage unless you put at least 20% down.

thanks for your help guys

[kensmith]

Zero down can be done, but its very hard to come by for investments and you have to have A+++ credit. If you plan on living in the unit it is much easier to find zero down loans.

As an investment I would suggest that you not only have a down payment, but also a reserve of at least 3-6 mortgage payments. Base this on the average eviction time and add 1 1/2 months for time to get it re-rented and do some repairs. Most investor forclosures occur when you get stuck with a non-paying renter and the investor didn't have the reserves to cover themselves.

[nickrizz]

if i am looking at a building that is a two family apartment at $225,000., the people pay $650/month each, and i have a credit score of 780, how much do you think i should put down on the building? most people tell me i have to put 45k down.

[kensmith]

I guess cash flow isn't an issue for you? This has a negative cah flow with out even having to get out a calculator or know the taxes ext. With a 780 score you can find at least a 5% down program, but it depends on your situation.

There are a lot of factors that go into deciding what down payment should be used. Including, but not limited to, how long do you plan to hold the property? Historical appreciation of the area (most use at least a 10+ year average), How much cash can youput into the building each month out of pocket (this looks like a negative cash flow building)? How much cash do you have? Does the building need any immediate repairs? Does the interest rarte matter to you? Do you mind paying PMI?...ext.

This list goes on much further than this and is the reason you need a Realtor(R) that knows investments. If you are here asking it means you need someone better than who you are using most likely. PM me if you need someone that knows what they are doing in your area.

[nickrizz]

thanks for your help i really appreciate it. i am looking to hold the property for about 10-15 years

[nickrizz]

there was a mistake, sorry. the building is $210,000.00 and taxes are 3,300.00 a year, do you still think thats negative cashflow?

[kensmith]

$1300 rent - $275 taxes - $75 insurance est. - $1000 P&I (this is based on 20% down using 6% interest rate) = negative $50.

We haven't even looked at vacancy factor (10% on a small building is the least you should use, ie. $130 month), repairs (at least $100 month if you do the work), who pays the utilities?, you will normally have to pay some part of them, rental license ($10+- month), plus the loss of income potential on your down payment @ only 3% is $105 a month.

There are even other factors but yes this is a negative cash flow building for sure. You might come out ahead in the long run IF you feel the market in your area will appreciate over the next 10 years and you have the extra cash to support the building every month. Figure at least $400 a month out of pocket per month, probably more.

There are much better investments to be found. Remember you don't have to invest in the area that you live.

[WeB_Masta]

definitely a negative cash flow

[Mack Perry]

Talk about digging deep to revive a thread and add nothing to it!!!

[BarryC]

That's hilarious. The thread is from 2005!