How Much Money do you Need to Buy a Rental Property?

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  • Thank you Mark for the free advice, seriously considering purchasing your book. Sheila

  • Donald P. says:

    Is this General Information or specific information in Colorado? I am in school right now for Carpentry/Construction and desire to move to real estate.

    • Hi Donald, This information is pretty true across the country on a percentage basis. Home values will vary from town to town and state to state.

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  • This isnt useless advertising. Hes got experience to back his knowledge up. Id do the same if I wrote an article like this! If he makes money off this then good for him! What have you done? Good stuff mark id like to chat a bit more with an experienced person on real estate would you email me at [email protected] thanks!

  • Michael Cellini says:

    Wow,

    What a great informative Blog! Great information Mark!

  • Mark,

    We have about 150K in equity on our first home which we purchased almost 16 years ago. This home is now a rental property – leased for 3 years by a nurse. i read in your blog that most banks usually require 20 to 25% down, which will be 65K for a 255K home. Do you think we can use the equity that we’ve built on our first home for a down payment for this home? We don’t live in that house anymore, we’ve converted it to a rental property.

    Your help is very much appreciated.

    Thanks,
    Eugenia

    • Hi,You would have to refinance the house or get a line of credit in order to use that money for a down payment on a new investment. Are you buying a house for rental or as owner occupants? If you are owner occupants you can buy with less money down.

  • Eugenia is going to have to move back into the first home to get any cash out. Here in Florida the lenders will not give you cash out or credit lines on investment homes. Move back in, do the refi and credit lines, then when you have lived there long enough meet you contract requirements you rent it again. I am closing on another refi this week and I own 10 SFR.

    • Hi AJ,
      I would not assume all lenders will not do a cash out or line of credit on investment properties. Some will not, but some do, especially portfolio lenders.

  • My son had a short sale on his house 3 years ago and is currently renting in California. We (elderly mother (68) on SS and husband ( 3 years shy of retiring) are currently renting in Texas. My son wants to buy a house in Texas so we can rent from him, which would give him a break from taxes. How is he able to do it. He has about 45000 to put down as a downpayment. My son’s salary is about 200.000 a year. The house is about 252.000 and is brand new. Please advise. Thanks so much.

    • Hi Winny,
      I would talk to an accountant first to make sure he is getting all the breaks he thinks he will. The first thing to do is to talk to a lender and see what his options are. He will probably need a larger down payment as an investor.

  • Hi me and my husband bought a 8 – plexs last year and we are living in it to we are thinking about buying another 8 plexs or 4 pled in 3 to 4 years any way this is the best way to become wealthy

  • Mark in reference to Winny’s question- Can we contribute money to our son for the downpayment. We also plan to
    rent from him? Thanks

  • Everything made perfect sense to me except for this statement:

    “If the seller doesn’t want to budge on price, raise the price of the property to make up for the closing costs. The cash you save up front will make up for the slightly higher loan and purchase amount.”

    Okay, let’s say I’m buying a $100,000 home with $5000 in closing costs (just round numbers to keep it simple)… Are you saying pay him $105,000 for the house, THEN ask him to pay for closing costs out of that? That’s probably what you mean. Really good idea.

    I just had my first investment property purchase fall through because the other bidder paid cash. He offered less (I don’t know how much less until it’s available on Zillow), but apparently cash is very attractive.

    Thank you for all the information.

    • Mark Ferguson says:

      You are correct in your the way you interpreted it John.

      • Farhan Abbasi says:

        Hi Mark,
        Very informative. For a $100k property, what is usually the range of monthly rent? I would like to understand the minimum monthly rent needed to generate positive cash flow?

        • Mark Ferguson says:

          That all depends on the market. It can vary widely.

  • Thank you for the info. I am getting ready to purchase my first true rental property. I think your book may be worth a read.

    • Mark Ferguson says:

      Thank you!

  • Cleo A Green says:

    Hi there, sorry to bother but I’m looking at purchasing a $200,000 apartment in cash, but I have no idea how to go about it as I recently moved to Co from Hong Kong. What extra fees am I looking at running into and what first steps should I take to lock it down? Also what happens if I’m getting that money from one of my parents but I want the apartment to be in my name? Sorry for all the questions!

    • Mark Ferguson says:

      That should not be an issue. I would talk to an accountant about the tax implications first though.

  • How does one find out about portfolio lenders in their area?

  • Hi Mark, through savings/investments, over the next couple of years I may have around $300,000 – $400,000 to invest in property. I am based in the UK but feel USA investment is a much better market to start off a real estate investment business/income etc. I would also look at properties in the $100,000 range, location does not bother me, purely where the best returns are to be found. My question is – if you were in this situation, would you use that cash to acquire as many properties as possible, so for instance just using $20,000 – $40,000 per property for downpayments/repairs/costs etc, maybe building up to say 10 properties that way, or would you put as much cash as possible into higher value properties/higher rental income and just purchase 1 or 2??

    • Mark Ferguson says:

      I would buy many properties with low down payments.

  • Peter Montgomery says:

    Hi Mark, I am interested in property management and currently don’t have a lot of money, what advice would you give me as far as getting educated and getting started?
    Thanks in advance.

  • Everything is true. Great job Mark.

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