Right now, we’re going to talk about some smart real estate investments.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: We’re going to go into both our wheelhouse, which is small unit development and sales. And that is two to four units… Is that a good place to be if you had a duplex, fourplex, do you think Bob, right now?
Bob Nelson: Well, right now, it’s probably about to safest, small income property investment that you’d be able to find. Especially, especially if you were to live in one side and rent the other side, which is always an opportunity. Now, if you’re a multimillionaire, you’re not planning on moving into one side of one of your duplexes.
But again, if you are a beginning investor, wanting to get out of wherever you are and into real estate, that’s a fairly safe situation.
Marcia Edwards: Well, now looking at financing these properties, I’ve heard that there are reserve accounts are required to reflect a level of ability to pay, if your tenant does not pay the mortgage or the rent, thereby your mortgage, you’re going to have to cover it. Is that a different approach than what you’ve seen historically?
Bob Nelson: Well, what I’m seeing; most of the duplex, threeplex, fourplex loans are Fannie Mae oriented loans, and those are fixed interest rates for the entire 30 year term. And they’re not particularly concerned with holding that excess reserve that they would, if it was a 30 or 40 unit apartment complex.
Where the concern is, are we going to be able to collect all the rent? And if we don’t, we’re going to hold some of your money aside to make those monthly payments where you are in fact, as a borrower, deficient in that payment. So, back to the duplex situation, there may be a requirement to make a payment of principal and interest, of course. But then with that, is there a requirement for a insurance reserve and a tax reserve along with the payment?
Marcia Edwards: Now, I’ve seen that recently, yes. But it’s just a checkpoint and it’s not an impound account where they’re going to track you over the life of the loan.
Bob Nelson: Right.
Marcia Edwards: Just a moment in time, at close of escrow, just this week, I have a pending sale on a duplex, and they’re suggesting that they have to reflect not just the reserves that would be standard, but also enough reserves to cover 12 months of rent.
Bob Nelson: Okay. So, that’s an interesting situation. The lenders are saying, “We will make the loan, but we’re going to make very sure that we’re covered. So if there’s any risk whatsoever, you, the borrower are going to saddle the entirety of that risk.”
Marcia Edwards: Well, there’s always downsides to a good idea, right?
Bob Nelson: There’s always downside to a great idea.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.