When purchasing real-estate in a hot area, the real money comes from increasing prices. Some cities have had something like 10% - 15% annual growth, for 10 years straight.
Banks are also much more forgiving when it comes to down-payment, when they know it's going to be a rental, and you already have other rentals as collateral.
In essence, purchasing a rental unit with only 1%-5% down payment up-front, is kind of like purchasing stocks with 20x - 100x leverage. As long as you meet your mortgage payments, get steady rent, and don't get any crazy expenses - you're sitting on a goldmine.
Some of the guys I went to school with did just that. Bought a rental unit, while working. All their salary went toward down-payment of the next unit, and the banks were very forgiving when it came to new loans. After 10 years they had a nice portfolio of rentals, which they then sold to typical real-estate investment funds.
> Banks are also much more forgiving when it comes to down-payment, when they know it's going to be a rental, and you already have other rentals as collateral.
I don't think that's true. The interest rate on your loan will be more expensive if it's an investment property and the LTV requirements are more strict.
If the bank knows it's a rental, it's considered a commercial mortgage with a minimum of 25% down.
And if you're lying to the bank by saying it's a residence when it's meant for rental -- you've just committed fraud (it's one of the clauses in your mortgage).
Banks are also much more forgiving when it comes to down-payment, when they know it's going to be a rental, and you already have other rentals as collateral.
In essence, purchasing a rental unit with only 1%-5% down payment up-front, is kind of like purchasing stocks with 20x - 100x leverage. As long as you meet your mortgage payments, get steady rent, and don't get any crazy expenses - you're sitting on a goldmine.
Some of the guys I went to school with did just that. Bought a rental unit, while working. All their salary went toward down-payment of the next unit, and the banks were very forgiving when it came to new loans. After 10 years they had a nice portfolio of rentals, which they then sold to typical real-estate investment funds.