How Residential Income Property Remains Profitable In The Real Estate Market?
Residential Income has always been the standby for many of the investors looking for opportunities in the Real Estate market. Before going through Residential Income property, let’s know what a Residential Income is. Residential Income is rental income generated from more than one family unit ranging from a double-family duplex up to hundreds of apartment building units.
Investors typically go for residential income properties because it promises the possibility of easy debt repayment through the income that is generated from such residential properties. One can generate profitable income from residential income properties once payments received from these properties cover debt repayment and other expense obligations in order to maintain the property. In short, the investor will be “using other people’s money” to earn profit from their residential income property.
Proper research or a survey is required before investing your money in such residential income properties. One should be aware about the proper income that must be yielded from the property to reach their investment goals. One of the most important aspects of the research should be about the current rent rates in that specific market where the property is located. The most important factor in doing proper market research is to understand the rental rates and the availability of rental units in the area. Good sources of information includelocal newspapers, online local classifieds, online residential income property listings or rental signs in the local area to better understand the rental rates for those markets where the residential income properties are located.
The next challenge when buying a residential income property will be financing, as lenders have become very conservative, rigid to all type of borrowers. However, if you can present the income generating ability of the property and prove the repayment of debt easily, then you will be on your way to completing a purchase of an excellent residential income apartment building. One needs to remember that once you apply for financing on a property that is more than five units, it becomes commercial real estate and the down payment and underwriting criteria change with typically larger downpayments of twenty-five percent or more. Underwritng will require that the property meet or exceed debt service ratio of 1.20 or more for favorable financing terms.
These were some of the important things you should remember when opting to go for a residential income for sale. After considering all the above facts, if you purchase residential income properties as your real estate investment you will receive all the benefits that the residential income property can provide in the future in terms of debt repayment, profit and a secured future.
Rebecca Lee is a well known Real Estate Manager who offers valuable and insightful tips on Commercial Real Estate Property Listings and Investment. Here she describes about the advantages of buying a residential income for sale.