Income Property Buyer Frequently Asked Questions
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Thank you for visiting my FAQ page for income property buyers. Below are questions that are frequently asked by people interested in investing in real estate. If you don't have a Realtor, I'd love to help you with your income property purchase. Please call me at (800) 477-0075 x 3 or complete online form, click here. Thank you! - Kevin Nakano |
Question: What type of income property should I buy: condo, single family residence, duplex, etc.?
Answer: Each type of property has pro's and con's, for example while condominiums are typically the cheapest property to buy, some condominiums have high HOA dues that eat into your monthly profit margin and you are ultimately responsible to the HOA for any violations (and associated fees) of HOA rules by tenants. Another example are fourplex properties, while they may have more rental income because of four rental units, they also have four times the property management fees, four times equipment maintenance,etc. Feel free to contact me for more information about pro's and con's of different types of income properties.
Question: How much do I need to put down for an income property loan 5%, 10%, 20%, 30% or more?
Answer: I am not a loan officer, so you'll want to discuss your individual scenario with a loan officer/bank (I can refer one to you if needed). But, what we've seen is that typically lenders will require that you put down at least 20% to purchase an income property. But, depending on the property, this may not be the optimal amount of down payment for cash flow purposes. But, there are other ways to acquire income properties where you can put down less money, such as turning your current home into an income property by purchasing a new home to live in. Please note, this scenario is only feasible for specific situations, so feel free to contact me to discuss further. I've also seen clients that have accessed equity in their primary residence for their income property down payment, you'll just want to make sure that the financial numbers make sense.
Question: Should I manage the property myself or hire a property management company?
Answer: The answer to this question depends on your individual tolerance for risk. I have some clients that choose to manage their properties themselves and I have some clients that prefer to pay a property management company to manage their properties for them. There are pro's and con's to each, which I can explain further. I can refer you to property manger resources if you choose to manage your income properties yourself or I can refer you to property management companies that I've referred clients to in the past.
Question: What area should I purchase in: South Sacramento, Natomas, Folsom, Roseville, Rancho Cordova, etc.?
Answer: If you're managing the property yourself, it's typically a good idea that you purchase income properties close to where you live so that if there is an emergency you can visit the property quickly and if any repairs need to be made you can oversee the repairs on a daily basis. If you hire a property management company, they can typically respond to emergency maintenance requests and oversee repairs for you.
Question: What price level should I consider: $100k, $200k, $500k?
Answer: Every individual has different opinions about this based on their financial goals and preconceptions about owning an income property. I can explain what some of my past investors have done and their reasoning so you can make an informed decision.
Question: Are there any tax benefits of owning income properties?
Answer: It depends on each individuals specific financial/tax situation. I recommend that you discuss income tax pros and cons based on your specific situation with your income tax professional. You'll also want to discuss both depreciation recapture and capital gains taxes for when you eventually sell your property.
For more information about buying income properties, please visit my website devoted entirely to investors, click here.
Answer: Each type of property has pro's and con's, for example while condominiums are typically the cheapest property to buy, some condominiums have high HOA dues that eat into your monthly profit margin and you are ultimately responsible to the HOA for any violations (and associated fees) of HOA rules by tenants. Another example are fourplex properties, while they may have more rental income because of four rental units, they also have four times the property management fees, four times equipment maintenance,etc. Feel free to contact me for more information about pro's and con's of different types of income properties.
Question: How much do I need to put down for an income property loan 5%, 10%, 20%, 30% or more?
Answer: I am not a loan officer, so you'll want to discuss your individual scenario with a loan officer/bank (I can refer one to you if needed). But, what we've seen is that typically lenders will require that you put down at least 20% to purchase an income property. But, depending on the property, this may not be the optimal amount of down payment for cash flow purposes. But, there are other ways to acquire income properties where you can put down less money, such as turning your current home into an income property by purchasing a new home to live in. Please note, this scenario is only feasible for specific situations, so feel free to contact me to discuss further. I've also seen clients that have accessed equity in their primary residence for their income property down payment, you'll just want to make sure that the financial numbers make sense.
Question: Should I manage the property myself or hire a property management company?
Answer: The answer to this question depends on your individual tolerance for risk. I have some clients that choose to manage their properties themselves and I have some clients that prefer to pay a property management company to manage their properties for them. There are pro's and con's to each, which I can explain further. I can refer you to property manger resources if you choose to manage your income properties yourself or I can refer you to property management companies that I've referred clients to in the past.
Question: What area should I purchase in: South Sacramento, Natomas, Folsom, Roseville, Rancho Cordova, etc.?
Answer: If you're managing the property yourself, it's typically a good idea that you purchase income properties close to where you live so that if there is an emergency you can visit the property quickly and if any repairs need to be made you can oversee the repairs on a daily basis. If you hire a property management company, they can typically respond to emergency maintenance requests and oversee repairs for you.
Question: What price level should I consider: $100k, $200k, $500k?
Answer: Every individual has different opinions about this based on their financial goals and preconceptions about owning an income property. I can explain what some of my past investors have done and their reasoning so you can make an informed decision.
Question: Are there any tax benefits of owning income properties?
Answer: It depends on each individuals specific financial/tax situation. I recommend that you discuss income tax pros and cons based on your specific situation with your income tax professional. You'll also want to discuss both depreciation recapture and capital gains taxes for when you eventually sell your property.
For more information about buying income properties, please visit my website devoted entirely to investors, click here.