My First Deal (ca)

[Kimberly 0]

Carmine,

 

Yes, it will depend on the market rent rates and how high the property taxes are in your area.

 

It will also depend on how much the tenant/buyers were able to improve their credit as many insurance companies now base premiums at least in part on your credit score.

[Walter 0]

In my opinion, it kind of seems like a disservice to the T/B when they go to refinance and they realize their PITI payments are now 20% more than they were just paying.

Carmine,

 

Their mortgage payment would still be at or under their rent rate.

<{POST_SNAPBACK}>

 

Maybe I'm missing something here then. I'll post numbers on an example and you can see where I'm coming from.

 

If you finance a 200k house at 8% on a 30yr amort....the payment is $1,467 PI. Throw in taxes and insurance which may be around 200-300 per month, and you're looking at a payment of around $1,700/mo give or take.

 

If the market rent on a 200k home is only around $1,150 or $1,200...even if you base your RTO payment on that plus a $200 premium, you're still about 20% less per month than what their payment will be when they refinance.

 

Maybe it depends on the market though.

<{POST_SNAPBACK}>

 

Thanks for your comments!

Since the market in my town is flat and slow I cannot go too high. So I would agree with Kim on going a little bit above current mortgage payment, insurance and taxes. Otherwise it may take me until winter comes and the snow will cover this little house

 

By the way my sellers (a couple) had lately fire in their other home and they couldn't find the description of property document.... so I may wait until Monday. This will give enough time to check rental agencies about rentals in the area of interest.

 

Walter

[Doug Pretorius (ON) 9]

My experience is the same as Carmine's. There's no way a 90-100% buyer can have payments anywhere near rent rates in my market. So doing an RTO at slightly above market rent, is really doing a disservice to them in the long run, because they wouldn't be getting used to the payment they'll have to make when they refinance.

 

Now on the flip side, you have markets which have a much higher rent-to-value ratio, where the situation is as Kim and Mr Saint have described. For example, there's a city less than an hour from me where there are many properties which payments at 10% interest would be the same as rent rates.

 

In that market I can definitely see that getting slightly above market rent would be a great deal for the RTO investor! But that's not how it is here in my hometown.