Frequently Asked Questions

Finding
a property

• How much should I put down when buying a property?

  Typically, lenders prefer a 20-25% down payment. However, this can vary based on the property’s price, its rental income, and the lender. Banks might ask for a larger down payment if the property’s rental income seems low for its price. Down payments can range from 20-40%. If you’re considering living in the property (like in one unit of a duplex) with an FHA loan, you might only need to put down 3-3.5%. For short-term properties, you might get financing with a 10-20% down payment. Remember, a bigger down payment can mean less interest, and you can also negotiate with sellers on interest rates.

• How can I calculate my expenses and potential income?

  Start by determining your expected rental income. For instance, if you expect $1500/month, that’s $18,000 annually. Don’t forget to include other incomes like pet fees or laundry charges. Then, calculate your expenses, which might include taxes, insurance, maintenance, utilities, and more. Subtracting your expenses from your gross income gives you the Net Operating Income (NOI). Once you have a mortgage, you can determine your Net Cash Flow, which is what remains after all expenses.

• I'm not in Florida. How do I manage property renovations?

  No worries! At Hampton Real Estate Advisors, LLC, we’ve assisted numerous investors in rehabbing over 1000 homes in the past 20 years. We work with licensed and insured contractors daily and can share their details with our clients. While we aren’t general contractors, we can provide updates with videos or photos of your property’s progress. Remember, rehabs can have unexpected changes, so always consider your budget and the extent of renovations you’re comfortable with.

• How can I view a property if I'm not in Florida?

  We specialize in assisting investors, so we understand the challenges of remote property viewing. If you’re interested in a property, we can provide videos, photos, or even a live walkthrough via video call. If needed, we can also arrange for a general contractor to inspect the property. Once you decide to buy, we can help get quotes for any work you want done and facilitate contractor visits. Our goal is to make the entire process smooth for you.

• What does "househacking" mean?

  Househacking is a strategy where you buy a property, live in part of it, and rent out the rest. This could be a multi-bedroom house where you rent out spare rooms, a duplex where you live in one unit and rent the other, or a property with an additional dwelling unit (ADU). Benefits include saving money, building wealth, potential for short-term rentals like Airbnb, and the possibility of using an FHA loan with a low down payment since it’s your residence. Always crunch the numbers to ensure househacking is a good fit for you.

• What is the difference between a hard money loan and private lenders?

  Hard money loans and private lenders both provide money to individuals, but they have some key differences. A hard money loan comes from a financial institution, usually with a higher interest rate than other lenders. These loans close quickly and often involve steps like an appraisal. On the other hand, private lenders can be individuals or companies offering financing, typically at higher interest rates than banks and other lenders. They also close quickly but may require steps like verifying income and credit.

• What is the process to use an LLC to buy an investment property?

  Using an LLC to buy an investment property involves three main steps: setting up the LLC, managing its finances, and working with a real estate agent to find the right property. Once you find a property, you’ll need to apply for a loan, secure the funds, and complete the purchase. After acquiring the property, you must maintain it and handle any tenants. Always check with your lender because some may not allow purchases through an LLC, requiring you to buy in your name and make changes afterward.

• What is the BRRR strategy and how can I use it in real estate investing?

  The BRRR strategy (Buy-Rehab-Rent-Refinance-Repeat) is a smart way to invest in real estate. It involves buying a property, renovating it, renting it out, refinancing it, and then repeating the process. This strategy helps you access more capital to grow your portfolio over time. By refinancing after adding value, you can reinvest without selling your investments. Always check with your lender about seasoning requirements and shop around based on your goals.

• Why should I buy now even if the rates are high?

  Buying now, even with high-interest rates, is a good idea because property prices may keep rising. It also allows you to lock in current rates and secure your investment. Rates may eventually drop, and when that happens, you can refinance at a lower rate, taking advantage of increased equity.

• What is a DSCR loan, and how can I use it for real estate investment?

  A DSCR loan is a type of loan for real estate investors. Lenders use it to determine if you can repay without verifying income. It’s not based on your personal credit or financials but on the property’s income. To calculate DSCR, divide the property’s net operating income by its debt obligations. DSCR loans are part of Non-QM loans. 

• How much should I raise rents each year, and why?

  Raising rents annually helps landlords keep up with inflation. A good rule is to match the inflation rate, which you can find in government data. Also, check recent rent comparisons for your area, considering square footage and amenities.

• What are the strategies to avoid rental evictions with your tenants?

  To avoid evictions, maintain communication, understanding, transparency, and prompt payments. Solve problems together. When communication breaks down, start the eviction process quickly to prevent further rent accumulation.

• What tax write-offs can I use as a rental property investor?

  Rental property investors can benefit from tax write-offs such as deductions for mortgage interest, property taxes, advertising, insurance, property management, repairs, depreciation, and losses against rental income.

• What are the top 8 ways to make your short-term rental stand out?

  To make your short-term rental stand out, follow these best practices:

  1. Furnish it nicely.

  2. Create a welcome package.

  3. Offer extra amenities.

  4. Include local information.

  5. Maintain cleanliness.

  6. Provide engaging activities.

  7. Consider being pet-friendly.

  8. Focus on energy efficiency.

  9. Offer discounts.

  10. Strategize marketing timing.

• What should I ask during due diligence when buying a multi-family property?

  When buying a multi-family property, ask about:

  1. Tenant status and rents.

  2. Building condition and upgrades.

  3. Estimated utilities and maintenance costs.

  4. Additional expenses.

  5. Zoning or legal issues.

  6. Expected improvements.

  7. Tenant security deposits.

  8. Seller’s tax and insurance status.

  9. Current loan details.

  10. Seller’s title policy.

  11. Request a T-12 financial statement.

  12. Utilities payment responsibility.

• What should be included in underwriting for a multi-family property's income and expenses?

  Underwriting for a multi-family property should include income items like rent, other sources, and potential additional income. Expenses should encompass property taxes, insurance, repairs, maintenance, administrative and office costs, payroll, marketing, property management fees, capital expenditures, and other monthly operating expenses. Be sure to consider interest rates and financing options in your underwriting.