Clau, Home Buyer in Rio Linda, CA

what are the risks of buying a house in rio linda in order to rent it.?

Asked by Clau, Rio Linda, CA Sun May 15, 2011

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Stan Richardson’s answer
You need to carefully review the property's economics:
1) Rents?
2) Expenses?
3) Can you live with the cost of investment mortgage financing?
4) What happens when you have a vacancy?
5) Is there enough cash flow to cover it?
6) Are you putting money aside in a reserve account?
7) How much money do you have to spend on repairs?

You should have an exit strategy, preferably more than one, when you buy property. You need to have a vision showing when you will sell, if you will take the money and pay taxes or complete an IRS 1031 tax deferred exchange. Is your plan to have enough money for retirement? Are you going to pay off the property or refinance it and use the proceeds to buy another investment?

Your exit strategy will help you make a better decision as you invest into the future. Pick a property you can live with into eternity. Worst case, if the market does not move the direction you expect and the value does not go up, at least your tenants are paying off the loan.
0 votes Thank Flag Link Mon May 16, 2011
Buying investment property is risky, but can be rewarding. Finding the right balance is the key. The risks are long vacancies, bad tenants, deferred maintenance, overpaying, just to name a few. The rewards are buying a home with acceptable cash flow that appreciates, has solid tenants who pay on time and treat the home as their own. Over time your cash flow improves, the home appreciates and you have a good long term investment.
0 votes Thank Flag Link Sun May 15, 2011
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