With home prices falling sharply enough to start cash flowing as investment properties or throwing off enough of a profit to make a purchase (and renovation) make sense, so-called 'vulture investors' are starting to enter the marketplace -- first as well-financed groups buying groups of homes from bank at 50% off peak prices, but now as individual investors thinking they've found an opportunity.
Sounds good, right? Not so fast, and it's not as easy as it looks -- and certainly more difficult than it was when credit was easier. From a Washington Post story:
More people are tossing around the idea of picking up an investment property, lenders and real estate agents have told me. "I'm finding a lot of people asking about them," said Jerry Bartlett, owner of a Jobin Realty brokerage in Kingstowne. Not many can pull it off, though.
Bartlett sends them to get financing before he will even start working with them. "They come back distraught," he said. The lines of credit they thought they could tap may not be there anymore; the credit rating that they thought was pretty good may not be high enough now; their down payment may be shy by 10 percent or more...
The first requirement is cash. Rick Eul, a vice president with Bank of America Mortgage in Annandale, said investors need at least 20 to 25 percent of the price as down payment. "Two years ago it was like, 'Do you have a pulse?' " he said. No longer. It's back to the pre-boom standards of creditworthiness -- or even a tad tighter...
You will have to prove to the loan officer that you have enough income to handle monthly payments on both the investment property and your own home.
If you have a signed lease and have already cashed your tenant's check for the first month's rent and the security deposit, you will still get credit for no more than 75 percent of the rent as income. (That's all you should count on. The remaining 25 percent normally gets eaten up by repair expenses, vacancies and other costs.)...
You will also need a credit score of 720 or better, Uhl said.
Plan to pay a higher interest rate than on your own home loan. Interest rates for investors are now running about one percentage point higher than those for owner-occupied homes.
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