7 Tips for Purchasing Single Family Properties

Sean Perkin

Sean Perkin shares his tips for purchasing single-family properties in this new blog post.

Sean Perkin is the owner of Sean Perkin & Associates, a real estate investment firm that has successfully brokered and syndicated in excess of one hundred and fifty single-family and multi-family investments in and around Los Angeles. Multi-family properties offer unique opportunities versus single-family homes. While single family homes typically generate much higher yields (return on cash invested) they do not produce income and as such are a higher risk. Multi-family investments which include apartments (5 plus units) offer investors numerous advantages over the long term and are a great way to go. As with any investment opportunity, research, knowledge and an understanding of the investment is critical to success.

Single Family Homes

  1. Can be bought as a primary, secondary or investment property (rental) with conventional financing being the best option.
  2. Buyers can purchase with as little as 3.5% down payment using FHA (government assisted) approved lenders so long as they qualify. However, typically if an investor is not able of prefers not to get an FHA loan (not difficult if you are a W-2 wage earner) they would come in with a down payment of between 20-30% of the purchase price.
  3. Current rates range from 2.5% to about 5.5% depending on each borrowers financial and personal situation.
  4. It is imperative to understand the investment horizon – which when financing can save thousands of dollars. As such, investors should pay close attention to the term of the loan, 3, 5, 7, 15, 30. No need to get a 30 year loan if you plan on holding for 5 years – which would typically have a lower rate. Borrowers also have the option of interest only or principal and interest.
  5. If an investor is planning on holding long term then a 30 year term locked into today’s rates might make sense.
  6. If a buyer cannot qualify for conventional financing then they could consider private equity (raising from friends & family – very difficult) or obtaining “hard money” which is very expensive (double to triple that of conventional).
  7. If the property is bought to “fix and flip” an investor can make a very attractive return, sometimes resulting in a doubling, tripling or even greater return on their initial investment. The return is obviously predicated on the purchase price, cost of the renovation, method of financing and ultimate sales price. Though the return can be tremendous, the investment return is in most instances Ordinary Income and taxable. If an investor opts to rent the property out rather than flipping it – there are advantages including tax benefits, depreciation, interest write off and deductible expenses.

Be sure to bookmark this blog, as Sean Perkin will be sharing his tips for purchasing multi-family properties in his next post.

Learn more about Sean Perkin on his Weebly bio, or view other investing tips by following his Tumblr blog: seanperkin.tumblr.com

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