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Old 06-22-2015, 08:32 AM
 
Location: Mount Laurel
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So basically it's going to cost you $1300/month (round up to be on safe side) to collect $1700/month rent?

I wouldn't do it.
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Old 06-22-2015, 08:49 AM
 
3,483 posts, read 4,625,315 times
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Originally Posted by sj08054 View Post
So basically it's going to cost you $1300/month (round up to be on safe side) to collect $1700/month rent?

I wouldn't do it.
I would look at it that way...
Are you taking into consideration that out of the 3100 that i'd be paying each month, at least 1850 of that is being paid towards principle, and that the amount paid towards principle goes only UP from there, meaning i'd be paying more and more towards principle each month, and less and less towards interest?
Also, that i'd be owning the house, free and clear in 10 years (if not sooner).
And that there's no chance of my rate going up...minimizing the risks that have been discussed in this thread.
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Old 06-22-2015, 09:09 AM
 
Location: Mount Laurel
4,146 posts, read 8,403,315 times
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Originally Posted by Thinking-man View Post
I would look at it that way...
Are you taking into consideration that out of the 3100 that i'd be paying each month, at least 1850 of that is being paid towards principle, and that the amount paid towards principle goes only UP from there, meaning i'd be paying more and more towards principle each month, and less and less towards interest?
Also, that i'd be owning the house, free and clear in 10 years (if not sooner).
And that there's no chance of my rate going up...minimizing the risks that have been discussed in this thread.
Yes.. your principal payment goes up but so does the monthly associated cost. HOA, insurance and taxes goes up. You may increase rent over time but account for turnover of renter as well. Number work out well if you have the same person rent from you for the next 10 years but that is usually not the case. I am happy when I have tenants for 3-4 years.

The way I look at rental property is like this. If I spend $100K to acquire it, I don't go in thinking that it will be worth more than $100K 10 years later. The house may be worth more 10 years later but the market will probably dictate that it will need updating and that could cost lots of money. I look at how much income I can generate from that $100K investment.
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Old 06-22-2015, 09:33 AM
 
3,483 posts, read 4,625,315 times
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Originally Posted by sj08054 View Post
Yes.. your principal payment goes up but so does the monthly associated cost. HOA, insurance and taxes goes up. You may increase rent over time but account for turnover of renter as well. Number work out well if you have the same person rent from you for the next 10 years but that is usually not the case. I am happy when I have tenants for 3-4 years.

The way I look at rental property is like this. If I spend $100K to acquire it, I don't go in thinking that it will be worth more than $100K 10 years later. The house may be worth more 10 years later but the market will probably dictate that it will need updating and that could cost lots of money. I look at how much income I can generate from that $100K investment.
HOA is like 38 bucks a month......it's been around that amount for the past 20 years.
property taxes are like 3k a month.....been around that amount for a long time.

yes, good point in your second paragraph....but you have the same risks associated with any other types of investment as well. Investment comes with Risk! more or less....but it has risks. If you put your 100k in the market, you're not guaranteed anything either....
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Old 06-22-2015, 01:49 PM
 
Location: Phoenix, AZ area
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At 3.89% on a 10 year term at $275,000 including P&I, Taxes, HOA, and Ins (nothing ever increases) your cost is $380,400. At $1,800 a month in rent, you would have generated (5% - 10% vacancy rate) $205,200 - $194,400 in the first decade. You are down $175,200 - $186,000. In decade 2, assuming all costs remain the same, your cost is $48,000 or $223,200 - $234,000 (previous decade loss plus new costs). In a very very over simplified way it takes over 20 years to break even, and you can never expect real estate to go up even though it likely will specially given the huge time frame here.

Note these numbers include zero repairs which average $1500 a year for me and about that every time I turn the unit.
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Old 06-22-2015, 03:18 PM
 
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Originally Posted by AZ Manager View Post
At 3.89% on a 10 year term at $275,000 including P&I, Taxes, HOA, and Ins (nothing ever increases) your cost is $380,400. At $1,800 a month in rent, you would have generated (5% - 10% vacancy rate) $205,200 - $194,400 in the first decade. You are down $175,200 - $186,000. In decade 2, assuming all costs remain the same, your cost is $48,000 or $223,200 - $234,000 (previous decade loss plus new costs). In a very very over simplified way it takes over 20 years to break even, and you can never expect real estate to go up even though it likely will specially given the huge time frame here.

Note these numbers include zero repairs which average $1500 a year for me and about that every time I turn the unit.
????
What are you talking about?
What do you mean "You are down $175,200 - $186,000 after 10 years"? I think you're forgetting that I will have a 275K house that's paid off at the end of 10 years (assuming no increase and no decline). In other words, based on your calculations. It will have cost me 175k-186k to gain 275K in the first 10 years.

Also, you counted the costs in the second decade (48k) but somehow failed to add the rent in the second decade...

Last edited by Thinking-man; 06-22-2015 at 04:03 PM..
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Old 06-22-2015, 04:06 PM
 
Location: Phoenix, AZ area
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Quote:
Originally Posted by Thinking-man View Post
????
What are you talking about?
What do you mean "You are down $175,200 - $186,000 after 10 years"? I think you're forgetting that I will have a 275K house that's paid off at the end of 10 years (assuming no increase and no decline). In other words, based on your calculations. It will have cost me 175k-186k to gain 275K.

Also, you counted the costs in the second decade (48k) but somehow failed to add the rent in the second decade...
For a Thinking-man you don't seem capable of thinking. The 275k house is a non-liquid asset it costs you 175-186k (thats a very low vacancy rate even at 10% over a decade) to get and costs you more to liquidate. Until you cash out, sell, that asset still cost you 175-186k out of your own pocket netting you a large negative, with liquidating the asset as your only means of gains. To liquidate the asset you have to pay capital gains, recapture depreciation, commission, and other closing costs.

Also, if you need me to subtract the numbers I gave you to figure out the total negative after 20 years then you need more help than anyone here can give you.

That's just the raw and oversimplified numbers, the home doesn't support itself so your risk is very high and the reward doesn't match it.
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Old 06-22-2015, 04:51 PM
 
3,483 posts, read 4,625,315 times
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Originally Posted by AZ Manager View Post
For a Thinking-man you don't seem capable of thinking. The 275k house is a non-liquid asset it costs you 175-186k (thats a very low vacancy rate even at 10% over a decade) to get and costs you more to liquidate. Until you cash out, sell, that asset still cost you 175-186k out of your own pocket netting you a large negative, with liquidating the asset as your only means of gains. To liquidate the asset you have to pay capital gains, recapture depreciation, commission, and other closing costs.

Also, if you need me to subtract the numbers I gave you to figure out the total negative after 20 years then you need more help than anyone here can give you.

That's just the raw and oversimplified numbers, the home doesn't support itself so your risk is very high and the reward doesn't match it.
Nope. You just forgot the fact that the house will be paid off and have a value associated with it (even though it's not as liquid as cash or stocks). You also forgot that the house will generate income in the second decade too....you know....just like the first decade. This turns all your "analysis" upside down.
Lol you clearly don't know what you're talking about. Please don't give anyone any advice.
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Old 06-22-2015, 05:16 PM
 
Location: Phoenix, AZ area
2,936 posts, read 2,406,665 times
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Quote:
Originally Posted by Thinking-man View Post
Nope. You just forgot the fact that the house will be paid off and have a value associated with it (even though it's not as liquid as cash or stocks). You also forgot that the house will generate income in the second decade too....you know....just like the first decade. This turns all your "analysis" upside down.
Lol you clearly don't know what you're talking about. Please don't give anyone any advice.
Your rent income is included in the numbers. What isn't included in that calculation is the additional tax liability though so it actually looks worse in reality than on paper.
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Old 06-22-2015, 05:55 PM
 
3,483 posts, read 4,625,315 times
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Originally Posted by AZ Manager View Post
Your rent income is included in the numbers. What isn't included in that calculation is the additional tax liability though so it actually looks worse in reality than on paper.
Oh yeah? Where is the 1800 a month income taken into effect for the second decade?
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