I own a condo downtown Chicago and would like to buy a second home, renting my current. Can someone just give me some tips/important info I may need?

Asked by Tarabennett, Chicago, IL Tue Nov 8, 2011

For example, would I need to put money down? Are there any watch outs or recommendations?

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16
jeff donnell…, Agent, Chicago, IL
Tue Nov 8, 2011
BEST ANSWER
Most lenders will require you to have at least 20% or more equity in your condo before purchasing another home. Some may require a signed or lease or your ability to pay for both homes with no renter. Lending restrictions have tightened towards this because so many people have walked away from the 1st home they are claiming to keep as a rental.

Please contact me if you have any additional questions.
1 vote
Phil Mistrata, Agent, Chicago, IL
Tue Nov 8, 2011
Most important advice would be to be sure you have a quality tenant. This can be accomplished by performing a credit and background check. If using a service of a licensed agent or agency they should provide this for you. Make sound decision based on facts then be sure you adhere to the law regarding security deposits and disclosures.
1 vote
Shawn Ryan R…, Agent, Belleville, NJ
Mon Dec 12, 2011
you will have to provide a lease showing that the condo is being rented out at a price that covers the mortgage. and you borrowing capacity will still be diminished because the bank knows that rental income is unreliable
0 votes
NonRealtor, , 23456
Wed Nov 9, 2011
Hi Tarabennett,
Wait another year to buy, prices are declining. Good Luck
0 votes
Kathryn Schr…, Agent, Chicago, IL
Wed Nov 9, 2011
Have you done your research on what your current home would rent for? Good news is that downtown rental prices have been on the rise. Reach out to your current lender regarding pre-approval. Good luck!
0 votes
, ,
Wed Nov 9, 2011
Hello Tara,
Great question. There are various factors for you to consider when purchasing a new primary residence and renting out your current home. When you are transitioning your primary residence and want to use rental income you need to have at least 25% equity in the property and a lease signed from the prospective renter to use rental income to offset the debt. If you don't havfe 25% equity you need to have 2 years of tax returns to show the property has been rented, for the last two years, which you probably don't currently have. The other alternative would be to get prequalified for an amount that would allow you to be able to afford both the old and the new payment. You don't need to have 20% down if you will use the new residence as a primary residence, typically, you'll need at least 5% down for a transaction like this. However, you may want to speak with me further so we can look at a full assesment of your financial picture and determine exactly where you stand. Hope this helps you out.

Cecelia Marlow
Chicago Bancorp
Mortgage Banker
312-738-6294
0 votes
Joe Schiller, Agent, Chicago, IL
Wed Nov 9, 2011
Tips are not what you need.. you need a full conference..your spending 100's of thousands of dollars and asking fro tips.. NO.. you need to make sure your doing the right thing.. please reach out to me and lets take this serious.. I figured out my time is worth about 150 hour and my clients time was worth about $500 an hour based on the advice I was able to give them
Web Reference:  http://www.joeschiller.net
0 votes
Carol Dorsey, , 60605
Wed Nov 9, 2011
You will want to check your condo docs to be sure of any restrictions on rentals in your building.
Good luck. Carol Dorsey
0 votes
, ,
Wed Nov 9, 2011
As a second home, you can put as little as 3% down. But the
Web Reference:  http://www.alexanderromo.com
0 votes
Matt Laricy, Agent, Chicago, IL
Tue Nov 8, 2011
You will probably have to put 20% down or more since its a second property. I would speak to a we lenders and see what they say. When it comes to the buying side, the main thing is making the numbers work for you. I would contact your agent and go over everything you are looking for and take it from there. If you don't have one, go out and get one. This way you have someone to walk you through the buying process, at no cost to you.
Web Reference:  http://AmericorpRe.com
0 votes
Jeff Stewart, Agent, Chicago, IL
Tue Nov 8, 2011
Good, you've done your research on the rental side. For a second home, even if you have a good savings and credit score no one will give 100% financing (meaning 0% down)...that's long gone! However, depending on what your lender offers, people are able to get as much as 97% financing so I would ask if they can offer this!

My offer to help is still on the table if needed.

Jeff Stewart - REALTOR®
@properties
309-269-3499 CELL
jeffstewart@atproperties.com
0 votes
Tarabennett, Home Buyer, Chicago, IL
Tue Nov 8, 2011
Thanks. The good news is that my current hoa is fine with renting. I am more concerned about what type of loan and % down I may need. I've heard that with a second home, I may not need to put anything down. My credit is outstanding and so are my savings. Sounds like next step is to talk to my lender about running some numbers to prove I can afford both homes in the event I lose my renter. I know I'll be slightly in the red with renting my current place, but I bought it planning to keep it forever as a rental. Eventually I'm sure I'll make money on it. :)
0 votes
Philip Sencer, Agent, Chicago, IL
Tue Nov 8, 2011
You need to speak with a few lenders to see what you qualify for and how much $$ they would want down. Lenders vary on this. You need to find out how much you can get a loan for with the expenses of your current property. Do you feel comfortable renting out your current property? Some folks do not like to be landlords and when you crunch the numbers your current condo might end up as a negative cash flow each month. Most condos do unless you put a large down payment.
My web site has some lender references if you need and it has some info about what I do in case you would like some help.
0 votes
Dirk Gould, Agent, Chicago, IL
Tue Nov 8, 2011
First, check your associations rules and regulations for any restrictions on rental terms and percentage of renters to owners in the building. Second, consider whether it makes sense to hire a property manager to handle everything so that you dont need to worry about many of the details. I would need to know much more about your present situation to give you more specific advice. I would be happy to help
0 votes
, ,
Tue Nov 8, 2011
You'll have to answer these questions. Are you occupying the new home as your primary residence? Will you be renting the condo? Do you want to use the rent to qualify as income?
Get pre-approved with your lender today. Make sure you work with an expert.

Alexander Romo
Senior Vice President
Chicagobancorp
312-738-8430
Web Reference:  http://www.alexanderromo.com
0 votes
Jeff Stewart, Agent, Chicago, IL
Tue Nov 8, 2011
Hey Tara, there are a couple major things that you'd need to do to get started. The first is to speak with your go-to mortgage lender about getting pre-approved since you will be getting a second mortgage. Once you get an official pre-approval you know that you're 100% able to purchase.

The next big thing is that you need to be sure your current building doesn't have any rental restrictions because many are starting to implement them. If your building allows them then it's ready to find a tenant!

If you're in need of help from a REALTOR whether it's to help you purchase your next place or even rent your current condo, I would be happy to sit down and talk to you about next steps.

Jeff Stewart - REALTOR®
@properties
309-269-3499 CELL
jeffstewart@atproperties.com
0 votes
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