Podcast - 079: How to purchase your first investment property?

In this episode, realtor Anthony Luevanos and lender Angel Luevanos explain how to purchase an investment property, what property management is, and what the benefits of owning investment property are.

What requirements do you need to purchase an investment property?
- Minimum credit score: 620 but much better with 700+
- Minimum down payment: 15%-25% or more
- Maximum DTI ratio: 45%
- Reserve requirements: 2-6 Months

Are there higher interest rates for investment properties?

Interest rates are typically 1% higher than it is for a primary residence. However, if you’d like to purchase with a lower interest rate, you can purchase owner-occupied financing, live there for a year, then move out afterward and use the property as an investment property.

What are the tax benefits of buying an investment property?

The mortgage interest on an investment property is fully tax-deductible. You can also deduct many expenses related to the property, including property taxes, maintenance, insurance, utilities, materials and supplies used for the upkeep of the property, advertising the property to attract renters, as well as for depreciation.

If you rent out the home for more than 14 days per year, the rental income is taxable.

What is property management and how much do they charge?

Property management typically charge between 8% and 12% of collected rents and they handle everything including:
- Marketing and pricing your property according to the current real estate market
- Show the property to potential tenants screen tenants
- Collect rent on your behalf and deposit the money into your bank account
- Handle tenant complaints
- Arrange maintenance and repair work
- Pay property-related bills, such as property taxes, utilities, and insurance

What are the benefits of purchasing rental properties?
- Generate passive income
- Investment increases with home appreciation
- Real estate values are generally more stable than the stock market.
- Rental income is not included as part of your income that's subject to Social Security tax.
- You can put real estate into a self-directed IRA (SDIRA).

This market is tough, and we understand that. So we made a free eBook to help you. “How to get a good deal in a seller’s market” eBook