When you are ready to make a real estate investment in Phoenix, AZ, you’ll need to know how much money you need. This really depends on what you want to buy, and how you want to buy it.
Financing an Investment Property
If you want to finance your investment property, you are typically going to need between 20 and 25 percent of the purchase price as a down payment on your loan. You’ll also need to keep some cash set aside for any repairs, vacancies, remodeling jobs and other potential emergencies. A typical starter property might cost $100,000. So, if you’re going to finance that property, you’ll need about $30,000 or $35,000 in cash to cover your down payment and any other unforeseen costs for which you want to be prepared.
Using Cash for an Investment Property
Obviously, cash is king. This is especially true when it comes to a lot of real estate transactions. If you want to pay for your investment property in cash, there are several different ways to obtain the funds. You can try a hard money loan, or maybe pull some money out of an IRA. You can also use other investments and switch them over to real estate. Buying with cash is always easier. However, if you want to leverage your money, get a down payment and a loan and then let your tenant pay that loan off for you over the years. That will affect you rate of return in the long run.
Consider All Options
With entry level investors, it’s always a good idea to begin looking for properties in the price range of $100,000 and $150,000. This is manageable, and if you decide to take out a loan, you’ll need 20 percent down and then between $5,000 and $10,000 available on the side for whatever the property may need. If you have that kind of money, you’re ready to go right now. If you have even more money than that, you can buy multiple properties. Or, you can buy in and refinance in a few years. Or, you can buy in cash and use the home as an ATM by enjoying the rental income you receive every month.
If you have any questions about how to budget and pay for your rental investment, contact HomeQwik.