There are several ways to do this:

1) Whenever I'm working with a client who is thinking of keeping real estate for investment purposes, I'll show them an interest-only loan while the client is buying the home as an owner-occupied property. Then when they are ready to lease it out the financing is already in place to maximize cash flow—without having to refinance.

2) Another great way to cash flow is a pay option arm. Plan to put down 20% but these loans are only good when the property is appreciating at 3-5%. A lot of people have negative opinions of ARM --for good reasons--but when the right borrower has the right loan program, success happens.

But when brokers sell the wrong loan to the wrong borrowers (first time home buyers) you have mortgage malpractice.

How does a pay option ARM maximize cash-flow? If the season investor (the only person I'd show this loan to) has a property appreciating at 3-5%, it may be a good idea to pay the 4% interest rate since the property's appreciation will offset the potential neg am. If the 30-year fixed rate is, say, 7%, you are cash flowing the difference between 4% and 7%. You essentially are getting your money each month instead of at the end when you sell it. Need to know more call me at 512-577-2958.

The biggest challenge I see with investors’ goal of cash flowing is this: They want 100% loans, and they want to cash flow when property taxes flirt with 3%.

Mon Dec 3 2007, 21:50

Anywhere you can find a duplex that cashflows is considered hot in my book, but like Perry said, if your docs aren't there and your not Owner Occupying then buena suerte!

Fri Oct 26 2007, 07:56

If you want to buy a duplex, understand that you need to go full doc to get a 90% loan unless you are owner occupied. There are no stated 2nd liens out there. Try area 5 as it is appreciating the fastest. There are a couple at $140 - $165K and they should rent for $750 a side.

Thu Oct 4 2007, 18:52

Sean,
Depending on how much you want to spend, how much you want to put down, and how "involved" you want to be in the management of the duplex, there are several areas that might be worth consideration. Area 2N (W: Mopac - E: I35/N: Parmer - S Mopac) is showing some nice growth lately due to the new Domain shopping mall. You can still find duplexes in the Mid to high $100K's that are fetching total rents from $1,200 - $1,600 (depending on location & condition). There's a good employment base nearby, and easy access to the major roads....location!

Of course, we would have to review your overall goals to find the absolute best investment opportunity for you.

Hope this helps,
Kevin

Tue Oct 2 2007, 20:46

Hi Sean - There are a number of areas that may work well for positive cashflow here in the Austin area. Usually, the duplexes in Austin proper are older and may not be in great areas. Additionally, zoning rules have made it more difficult to build multifamily properties in the city. If you look in the outlying areas of town, you are more likely to find newer properties, which of course translates to lower maintenance for these units. The duplexes that are the best bets are probably south and southwest (with regard to appreciation), or on the far north side (for cashflow and for lower maintenance). I hope this helps!

Mon Oct 1 2007, 11:11

Hi Sean,

I'm not as schooled in the duplex market, but I can tell you that single family homes are doing quite well both in terms of appreciation and cash flow in Austin. I recently purchased a home in South Austin, new construction, that appraised higher at close than the purchase price. The rent time was quick and at top dollar. The key is knowing the right neighborhood. We like specific communities in Round Rock, Cendar Park and parts of South Austin - chosen based on quantifyable data and research.

We take into account a number of factors, including:
• The natural path of growth within the metro
• The presence of large, sound, industry-diverse corporations
• Commute patterns
• Future plans for additional corporate entities
• Availability of State and Local government jobs
• The presence of cultural activities – music, art and nightlife
• Leisure interest and recreational activities, such as golf, hiking and athletics
• The development of retail outlets and restaurants
• The quality of local school systems

It's always a good idea to have good solid data to make a decision.

Hope that helps.

Brandie

Mon Oct 1 2007, 10:50