|Table of Contents|
|2007’s Top 10 Investments Under $25,000|
|1.||Invest in a single family or multi-family property|
|2.||Invest in gold and silver|
|3.||Invest in foreclosure properties|
|4.||Invest in mobile homes|
|5.||Invest in fractional ownership of timber|
|6.||Invest in loans|
|7.||Invest with partners on larger projects|
|8.||Invest in Japanese yen|
|9.||Invest in a business or franchise|
|10.||Invest in vacant land (domestic or foreign)|
#1 Investment Under $25,000 for 2007
Investors who haven’t yet purchased a personal residence may consider buying one that could later be used as a rental property. Lower rates and higher loan-to-value (LTV) financing are available for personal residences, and a potentially large tax exemption is available for those who sell a property they lived in for two of the past five years.
This means that an investor could potentially move into a home, live there for two years, rent it out for three years and then sell it with a personal residence tax exemption. The funds gained could then be invested into another property. Another option would be to hold the existing property as a rental. This is an excellent way to get started in real estate investing.
Investors who already own a personal residence and prefer not to move can still purchase a rental home with a down payment of $25,000 or less in many markets. Investment properties generally can qualify for around 80 percent financing with rates approximately a point or so higher than those for personal residence mortgages.
Where to find investments:
Investors can find single family properties for less than $130,000 in many U.S. cities| alt=|single family residential home|]Many regions of the U.S. have properties available in the $130,000 range and below, making it possible to purchase property with a down payment of $25,000 or less on an 80 percent LTV loan. Existing single family homes in metro areas within Ohio, Texas, New York, Pennsylvania, Indiana, Illinois, Tennessee, Louisiana, Iowa, Wisconsin, West Virginia, Michigan, Arkansas, South Carolina, Kansas and Oklahoma have median prices of less than $130,000, according to a 2007 study by the National Association of Realtors. The added benefit with buying in these areas is that it is much more likely the property will experience net cash flow, which is particularly important in today’s real estate market.
Some areas offer properties where the homes themselves cost less than $25,000. A search for properties in Kansas City in spring of 2007 turned up more than 200 homes on the market that were listed for less than $25,000, Brad Korn, a local Keller Williams real estate agent, said.
Similarly, properties in central Little Rock can be found for $6,000 to $10,000, and investors can significantly increase the value by remodeling them, Scott Grummer, president of the Little Rock Real Estate Association and executive director of the Downtown Little Rock Community Development Corporation, said. The cost of financing such properties is less than half of the rental income, which means an investor can have a 50 percent vacancy rate and still be able to carry the mortgage, he said.
Investors who are not familiar with these low-cost areas can check online listing services such as Trulia.com. (See our article on Trulia.com for more information.) In the current credit crisis, with so many subprime borrowers defaulting, smart investors will have the patience to keep looking until they find properties that offer exceptional bargains.