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Old 01-26-2019, 09:18 PM
 
8 posts, read 3,445 times
Reputation: 10

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First off I want to thank you for spending the time to read this and for your time responding.

A little background on us:
My wife and I are both 29, I will be 30 in April. No kids and will not be having kids for another two years most likely. We both work with a gross income of $158k last year. Our bases are 105k but we had good bonuses as well as overtime this past year.. This year will most likely be a little less, $130-140k range as they are changing my works bonus structure.

We put 21% each into retirement. 10% Pre tax 11% Roth. My wife has a 6% match while I have a 3% match.

As of now our assets are:
$11k liquid mix of CDs/Cash
46k in my 401k
88k wife's 401k
3k in mutal funds.
59k equity in home
$35k in cars (3, selling one shortly for $26k. Have a company car and no need for so many..my wife works from home etc)

Our only liability is our mortgage. CCs are paid in full each month. We owe $208k on a 20 year note. We are paying an extra $220 towards it so it should be paid off in 16.5 years. Total mortgage including taxes and insurance is $1850 which includes the extra $220 towards principle each month.

The rental:
We are looking at purchasing a 96k townhome in the next 12 months. I want to put 35k down and finance it through our credit union. HOA, P&I, Insurance and taxes will run $577ish/ month on a 30 year mortgage. We have lived in this neighborhood in the past so know the area and know it is a nice place to rent. Rentals like this one are going for $950 a month and rent fairly quickly.

Our plan is to use the cash surplus from the rental back into the property towards principle. We will put an additional amount towards the principle each month to have it paid off within 5-7 years.

Our plan over the next year is to save an additional 30k. Between what we save now and bonuses this should be possible as we did it two years ago to save for our first home.

Does this sound like a wise investment or should we be putting our money somewhere else?

Last edited by SouthernLCPM; 01-26-2019 at 10:28 PM..
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Old 01-26-2019, 09:39 PM
Status: "hamburger went up again." (set 13 days ago)
 
Location: Scottsdale
2,739 posts, read 2,106,974 times
Reputation: 5157
$6000 per year net on a $35,000 investment sounds good to me.

Why do you want to put additional principle onto the note to pay it off in 5-7 years? The better use of those funds are probably invested rather than thrown @ debt.

This is a good calculator for experimentin'
https://www.calculator.net/rental-pr...alculator.html
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Old 01-26-2019, 09:59 PM
 
8 posts, read 3,445 times
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Quote:
Originally Posted by tommy64 View Post
$6000 per year net on a $35,000 investment sounds good to me.

Why do you want to put additional principle onto the note to pay it off in 5-7 years? The better use of those funds are probably invested rather than thrown @ debt.

This is a good calculator for experimentin'
https://www.calculator.net/rental-pr...alculator.html

Thank you for the reply. I will take a look at that calculator shortly. I think my original numbers were off but now updated.

Last edited by SouthernLCPM; 01-26-2019 at 10:29 PM..
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Old 01-26-2019, 10:15 PM
 
8 posts, read 3,445 times
Reputation: 10
Well it looks like I was off on my first set of numbers. I'm not sure how to post a picture/screenshot of the numbers but it's actually $2804/ annual return after inputting the below info.


Income $950
Mortgage pay $336.11
Vacancy 5% $47.50
Property tax $103
Insurance $41.67
HOA fee $88
Main cost $83.30
Other cost $16.67
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Old 01-26-2019, 10:30 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
8,687 posts, read 6,153,408 times
Reputation: 12736
Did you check with hoa to see if they allow rentals?
I don’t know the area, but your vacancy rate could be a little low.
You are not factoring carry costs while it’s empty like utilities. Your return is 8% , probably will be lower. No allowance for replacement appliances, furnace, ac, carpeting paint is factored in.
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Old 01-26-2019, 10:31 PM
 
8 posts, read 3,445 times
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I have several questions really but basically they are this.

1. Does it make sense to buy this property?
2. If we do buy this property is it better to pocket the difference between costs and net every month, pay extra towards the principle or ??
3. Does this even make sense with our income? What would you recommend we do instead?

Thank you
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Old 01-26-2019, 10:34 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
8,687 posts, read 6,153,408 times
Reputation: 12736
Depending on how aggressive, how does it look if you put down less and buy 2.
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Old 01-26-2019, 10:34 PM
 
8 posts, read 3,445 times
Reputation: 10
Quote:
Originally Posted by aslowdodge View Post
Did you check with hoa to see if they allow rentals?
I don’t know the area, but your vacancy rate could be a little low.
You are not factoring carry costs while it’s empty like utilities. Your return is 8% , probably will be lower. No allowance for replacement appliances, furnace, ac, carpeting paint is factored in.

They do. We actually rented a 2 bedroom in this area 4 years ago. This is a 3 bed 2.5 bath. I left it at the already inputted 5% but from what I've read 10% is more on par. Main cost/other cost of $100 in the above post account for this.
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Old 01-26-2019, 10:34 PM
Status: "hamburger went up again." (set 13 days ago)
 
Location: Scottsdale
2,739 posts, read 2,106,974 times
Reputation: 5157
Quote:
Originally Posted by SouthernLCPM View Post
Well it looks like I was off on my first set of numbers. I'm not sure how to post a picture/screenshot of the numbers but it's actually $2804/ annual return after inputting the below info.


Income $950
Mortgage pay $336.11
Vacancy 5% $47.50
Property tax $103
Insurance $41.67
HOA fee $88
Main cost $83.30
Other cost $16.67
If you could cut the maint cost and/or squeeze a little more in rent per month it'd net the "magical" 10%. You're close.
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Old 01-26-2019, 10:38 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
8,687 posts, read 6,153,408 times
Reputation: 12736
Quote:
Originally Posted by SouthernLCPM View Post
They do. We actually rented a 2 bedroom in this area 4 years ago. This is a 3 bed 2.5 bath. I left it at the already inputted 5% but from what I've read 10% is more on par. Main cost/other cost of $100 in the above post account for this.
You need to check if there is a cap of any sort. Some allow only a percentage to be rented out and if they reached itbyou might not be able to rent yours
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