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So, I have this question for you all.
Would you rather buy 1 primary home for $300k cash or buy 3 investment homes cash at $100k each?
I live in Phoenix and rents for the investment homes I can get $1000 a month. After property taxes, insurance, HOA, etc. I would net about $700 each, not including capital gains tax at the end of the year.
Rent on a $300k house is about $1700 a month, so I would be saving that if I purchase cash on primary home, but if I buy the investment properties, I would make about $2100.
What would you guys do if I were me? BTW, I'm currently renting.
Firstly their is no "capital gains tax" until you SELL AT A PROFIT -- the income you receive from renting out properties is ordinary income, and you get to offset it with all the normal expenses of maintaining a home to people to live in and the cost of running the "business" of being a landlord.
it is far from a slam-dunk that you will have full occupancy / completely current tenants.
Secondly even if you cash flow analysis works out you have not done the analysis of using $200K to buy stock in a computer and consumer electronics firm, a food company, or any other kind of firm. You could probably get a close to zero risk return of about $12,000 on a portfolio of investment grade bonds. If you buy bonds that are tax exempt in AZ that would be a way to beat taxman too...
Would a $300K house provide with literally 3X the utility of a $100K house???
Do you want to have $300K tied in residential real estate in AZ??? Why?
In a RE market as bad as Phoenix is, buying any RE is a bargain, but I certainly wouldn't spend $300,000 cash for all of them.
I'd buy two for all cash and live in the third; keep in mind that the feds and/or HUD have tons of pfrograms and $$$$$ available for folks who are willing to provide housing for seniors, and they traditionally pay well above-market rental rates as well.
Would you rather buy 1 primary home for $300k cash
or buy 3 investment homes cash at $100k each?
What would you guys do if I were me?
I'd buy 10 rentals @ about $25,000 (down) each.
The current owner will hold the paper for 10 years
Hold the last $50,000 as prudent reserve pool.
Rent them all out asap at whatever amount you can get.
Start doing the renovation on them one at a time with VISA.
Then move yourself between the properties as you do renovations.
Every 3rd one that you reno you sell.
Use the proceeds to replenish your reserve pool and pay off the VISA.
In ten years time you'll own 6 maybe 7 properties outright.
All will be renovated.
You'll have lived for free the whole time.
I'd buy 10 rentals @ about $25,000 (down) each.
The current owner will hold the paper for 10 years
Hold the last $50,000 as prudent reserve pool.
Rent them all out asap at whatever amount you can get.
Start doing the renovation on them one at a time with VISA.
Then move yourself between the properties as you do renovations.
Every 3rd one that you reno you sell.
Use the proceeds to replenish your reserve pool and pay off the VISA.
In ten years time you'll own 6 maybe 7 properties outright.
All will be renovated.
You'll have lived for free the whole time.
CiDatak,
Buy as many homes as you can with your cash.
Pick one, move in , no mortgage, and make it your home.
Collect rents from the others.
It's a no brainer.
No mortages on ANY of them.
All owned outright.
Enjoy life.
That's what I would do.
financially buy the rentals... but ,having to deal with 3 tenants and their issues i would buy the 1 home and spare myself alot of potential aggrevation.
been dealing with tenants my entire life and as everyone knows as i said it time and time again here. landlording is great ,that is until its not and then it can be a real horror.
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