Is it viable to use loans to acquire profitable real estate?

[sethmachine]

Can one use a loan to purchase real estate, and then rent that real estate, such that the rent paid (and the risk / expected value) exceeds the loan repayment / cost of maintenance of the property ?

Or could one start a company which does this, i.e.

1. Finds suitable real estate
2. Acquires a business loan to purchase the property
3. Rents / leases the property such that there is a suitable margin of profit with respect to the total loan costs ?

[Nutria]

Sure. Happens all the time, at both the individual (my father did it for many years) and corporate level.

Naturally, you have to write a business plan -- not just for the lender, but for yourself, so that you don't lose your shirt -- which takes into account:

• rent rates in the region you live
• mortgage rates
• occupancy rates
• how you'll pay the mortgage when the unit isn't occupied
• how you'll keep it repaired
• how you'll collect rent
• how you'll vet prospective tenants
• etc.

[97guns]

I have loans on 2 rental properties and they make a better ROI than my properties that are free and clear. An owner occupied loan has a lower interest rate than a non owner occupied loan, when I was buying the interest rates on loans for a non owner occupied property was around 6% and that would severely cut into your monthly ROI. There's no law that says you can't apply for an owner occupied loan then move out and make it a rental later.