Is there something that I'm missing?

[Tarrek El-Saadi]

I'm just dipping my toes into the real estate realm and want to purchase an investment property. I feel like I'm having a serious information gap with buy and hold strategies, especially turnkey. Purchasing these properties for $80,000, 20% down, makes the mortgage and tax payment to less than $400, but properties in these areas are renting for $800? I don't know if I'm missing something but that's a $400/mo return (minus any property management fees, vacancy expenses, and depreciation expenses). Then you can turn around and borrow another loan against the equity on the home you just bought and do it again. Is it really that simple or am I completely missing something? Again, brand new to this and just looking at properties on zillow, realtor, and turnkey agencies. 

[Bradley Chapple]

@Tarrek El-Saadi

A bank loaning up to 100% of the value of the home would (usually) be too risky. The lender has to take into account a potential drop in home values. This buffer is to provide a “Plan B” if you were to default on the loan and they needed to take possession of the property and sell it. If you were the one loaning your money, you’d probably do the same.

With that being said, I have heard of a couple of lenders who will offer HELOCs of 90 to 100% LTV on a primary residence, because they assume that you'll be less likely to default on a property you need to keep a roof over your own head.