Mr. BFS and I paid off our first home in early 2013. It has become a nice rental property. Now we are considering when to buy another one…
Getting Pre-Approved for Another Home Loan
Our first step in this process was to look around at home loan requirements since the whole idea would have been moot if we couldn’t secure a mortgage. When it was obvious that the interest rates are doable for us and that we had 20% for a down payment, I applied for an investment property home loan. We were pre-approved within a couple of days.
Keep in mind that being pre-approved for a home loan is way easier than actually getting a home loan, BUT it is an important step.
Finding Our Next Investment Property
Our next property will need to fit a very specific set of requirements. We are looking for something within a half hour of our current home. It also needs to be at least 1600 square feet and have at least 3 bedrooms and 2 bathrooms. Easy parking is also a must. Lastly, we are looking for something built somewhat recently – no earlier than 2000-2001.
In our area, a home like that can cost $75,000 or $200,000 depending on the neighborhood, condition, and a billion other conditions. We are looking for something in the $80,000-$125,000 range that is located in a neighborhood that rents for $1100 or more per month.
Our mortgage will be around $500 a month, property taxes will be another $300 a month, and home owner’s insurance will be around another $100 a month. That will leave us with a $900 bill per month, so the home needs to be able to rent out for at least $200 more per month so it can afford its own maintenance.
We’re self-employed, so we are going to take a few more months to save as much cash as we can before we jump into the buying pool. I would like us to be able to afford the 20% down payment without using the majority of our emergency savings and padding. You never know what you will be making the following month when your main business is blog-related. Having padding is what keeps us sane.
All in all, we won’t be closing on another rental property until at least 2015. But I do like our current circumstances. It’s nice to take our time to look around. It’s nicer knowing that we can make low offers and have the time to wait until one is accepted. We’ve always felt rushed when buying a home before.
Do you have an investment property? How did you pounce on it?