Buying Less Expensive Rental Properties and Building Equity Quickly

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I recently wrote a blog post on a Wilmington, North Carolina real estate blog discussing how many properties there currently are listed in the local MLS for under $100,000. Just a couple years ago the only properties in this price range were either tiny or in need of some serious repairs. Fast forward to 2011, and there are over 148 properties in Wilmington $100K and under and there are 372 when you throw in some of the surrounding communities. With so many depressed properties, now may be a great time to swoop and find some great bargains, especially if you have the down payment to make the financing a reality. Most local mortgage lenders and brokers that I have spoken with require at least 20% down and some require 25% before the pricing becomes attractive.

When considering houses in this price range, investment buyers may be more interested in rapidly gaining equity rather than turning a net profit from the monthly rental income. One of the fastest ways to payoff a mortgage is not to position yourself in a long term 30 year product.

Loans such as ten year loans or fifteen year home loans, which may seem unnecessarily risky for more expensive homes, may not seem like such a stretch when you are talking about hundreds instead of thousands of dollars in monthly rent loss in the event of a vacancy. Another way to speedy up the accumulation of equity is to make additional principal reduction payments whenever you can. You’d be surprised to see just how much of a difference one extra monthly payment a year can save you in interest over the life of your loan.

There are plenty of great mortgage companies throughout the country who can help you find the right mortgage program to meet your needs. You can use the rate tables on to compare mortgage rates, closing costs, and point information from competing mortgage providers and brokers. Keep in mind that the terms posted are for primary residences so expect some pricing adjustments when you connect with the companies.

Speaking of Cheaper Options…How About Mobile Homes as Investment Properties?

There are some interesting web sites out there such as which are packed full of information on how to get started in the investing process. One particular article written by Tony Colella and Scott St. Aubin lists out the Top ten reasons to invest in mobile homes with land.

They were:
1. Reduced Competition – There are less people who invest in mobile homes than there are in stick built homes.
2. Less Monetary Risk – It may be easier to find a positive cash-flow on a mobile home than other type of property because they are often less expensive.
3. Better Chance for Appreciation – While mobile homes in parks face an almost certain depreciation over time, a unit with land helps the property to better maintain its value and possibly appreciate over time.
4. Focusing on Demand – The authors actively go after properties in markets where there is a need for affordable housing.
5. Less Expensive to Maintain – Tony and Scott believe that the repairs needed on manufactured homes typically cost less than on stick-built construction.
6. Benefit of a Long Term Investment – These investors rent their properties at a positive cash-flow and write off real estate depreciation and many of their expenses.
7. Competitive Product/Easier to Replace – They argue that it is easier to replace an outdated mobile home with a newer one than it is to replace an older stick built home.
8. Better Control – When a mobile home owner also owns the land which the trailer sits upon, they are not beholden to the demands of the owner of a park. Be the landlord versus having to answer to one.
9. Greater Leverage – They believe that more lenders feel comfortable with real estate investments than they do with mobile home investment notes.
10. Passive Real Estate Investing – The authors note that one of the most unique aspects of investing in manufactured homes on owned land is the ability to sell the mobile home and rent the land.

One of the greatest hurdles getting into this type of business may be obtaining financing for mobile home loans that are to be used as investment properties. Many large manufactured housing lenders such as American Financial Resources only offer manufactured home financing for units which are to be used as buyers’ primary residences. Some may only offer financing for double or triple wides but not for single wides. It may require a good amount of digging to find a lender who will lend on mobile homes as rentals. If you find some, please post your find as a comment so that others can benefit.

You can read the entire article here:

Investment Property Calculator – Rate of Return Calculator

Looking for a tool that can help you quickly and easily give you a snapshot of numbers relating to an investment property? KJE Computer Solutions put together a cool calculator for people interested in rental properties. Simply enter information on your property such as your loan amount, interest rate, amortization period – the value or your land, personal property, and building – your estimated annual rent, projected vacancy rate and depreciation rate – and a breakdown of your annual expenses, and click “View Report”. The result will be a detailed summary of the featured property including estimated cash-flow and projected rates of return. Pretty cool stuff.

Nat Criss is one of the owners of Nat has an extensive background in mortgage finance, real estate, and online marketing. Nat was previously the Marketing Director for AAXA Discount Mortgage, a mortgage company which conducted business in 26 states, and currently helps run CMG Equities, LLC and ILM Marketing. My Google Profile+

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