Crown,
As a first time buyer you can easily get a favorable loan with only 5% down.
You may want to buy multiple properties as you can buy several (lets say 3)and state that they will all be your primary residence, getting a favorable intrest rate on all 3 and only putting 5% down on each. See, it takes 2-3 months for a property you own to show up on your credit report, so other lenders wont know. The lender will never know you are not living in these so called "primary residences" - unless you miss a payment, which you will NOT do because that will really screw up your ability for future investments.
Another good idea is to buy duplex or triplex, find one where you can have a place of your own and the rent from the other units pays your bills, now you can bank your entire pay for future investments (although if traveling a lot you may noy need this right now) but it is a great idea for when you are going to shell out cash for your own place.
As far as what type of investment property.......
there are cash flow properties and appreciation properties. i like appreciation properteis better.
if you buy a property in an area that is cheaper but has less chance for appreciation, you may make a few hundred a month, but you will have more likelihood of problem tennants and some of your monthly "profit" goes back into fixing problems with the property, so you can get nickeled and dimed to death.
I like to buy where the market is hot, usually center city properties and up and coming neighborhoods, you pay more or have a higher monthly mortgage but your rent is higher and you may sell in 1-2 years for a sig profit. Now you can do some more risky financing like intrest only loans or negative arms so you can buy a house for 2-300,000 and have a payment as low as 1000 to 1200 and still get a profit on monthly rent, hold the property for 2-3 years and sell for very good profit, but this only works if you buy where you know the property is going to have big appreciation, like a center city property or a neighborhood that is undergoing a rapid renovation.
As far as fixer-upper's, well it can take a long time to get the work done unless you really know what you are doing, know contractors who will give you good deals and who you can trust. And as far as buying shells (houses that are not livable in their current condition) you can get great deals, but a lender will not give you a loan for that house becasue it is too high risk for them, you have to have cash on hand or some one to back you and you will have to purchase the house, so probably not a good place to start, easy to get in over your head with something like that.
My first to were both estate properties, they needed some cosmetic work, but all the systems were functional and ready to move in, just needed some cleaning up (painting and patching, peeling wallpaper, refinishing hardwood floors or recarpeting) easy and fairly cheap to take care of that and got them both at laest 10,000 under going market rate which was good because i had immediate equity and was able to take out lines of credit for more investing.
In 2 weeks im going in with a partner on a huge 6 br house near a major college campus, house is pretty cheap, neighborhood is a little seedy, but got a lender to let me in with 5% down so hardly had to put up anything for it.
Thinking about renting it out room by room, could be a huge monthly cashflow, may be a management nightmare (will have 5-6 separate tennants in one building), but im willing to take the risk becasue its costing me almost nothing up front.
Oh yeah, for your financing talk with someone who is a mortgage specialist, someone who will call around to different lenders and find you the best deal for you. DONT let a realtor tell you, "just use my finance guy" talk to some people your area who are already successful investors and find out who they use to set up their financing, when you have a contact or buddy who will help push financing through for you, it will be so much easier to get multiple properties and to ***** little things here and there. Also that is where you will find out about creative financing and many different types of loans.
But my recommendation for your first rental property is to have a realtor who specializes in investment propeties show you ones in the city you are in where the hottest market is and try to find a deal there, something a little under going market rate that does not need major work. just make sure you can rent in for more than your monthly payment will be.
