I want to buy an REO and keep it as a rental property.
In order to "cash flow" a rental property with a mortgage, the mortgage must be no less than 20-30 years depending on the amount borrowed against the property. Assuming the amount is six figures, to cash flow, the loan would undoubtedly have to be at least 30 years just to make the payment small enough to allow a renter to pay rent equal to or higher than monthly loan payment. Some banks have a minimum they will loan in terms of years based on the amount of borrowed. They won't loan 10K for 30 years or none that I have located at this point.
According to some banks and institutions I've looked into, their terms stipulate loans of up to 60-80% LTV (loan to value). To make this a "no money down" transaction, when purchasing and financing this property, the total cost of the transaction must be less than the LTV. Otherwise, the bank or institution requires 20% down. Again, depending on the loan amount, may only loan for a maximum of 5 years and no longer based on the amount borrowed.
For those of you who are carrying a mortgage on your property, what are the terms? Were they "no money down" with 100% financing? What institutions are you using to fund your properties?
If and when a tenant does not pay rent, the bank still gets their money regardless. What have you done in this scenario? The eviction process takes just a few days to several weeks depending on your state laws with regards to tenant/landlord rights. During which time, your bank payment never stops. Finding good tenants is not an issue, but this can and will come up while being a landlord. How have you handled this situation?
The other area of my concern is Debt To Income Ratio. Once you have surpassed this level, the bank will not loan any more regardless of the equity in the property. So, how is it that anyone can mortgage so many properties with so much debt and little income to justify the debt? Furthermore, if it has been shown that you have been financing 100% with zero money down, is the bank not frowning upon this with the more transactions you perform? How are you getting around this? How are you financing these rental properties? Is there no limit as to how many properties the bank will finance? Is this not a repeat of why the current real estate market as well as the economy is the way it is because people were borrowing more than they could afford?
I look forward reading to your response to my concerns.
When responding, please stay on topic, Thanks!