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In my case paying 25% down and financing 75% the mortgage payments are a great way of avoiding taxes on the rental income.
Plus, if the value of the dollar declines like I'm expecting (inflation) I'll have a very nice sum of money -- the mortgaged part -- that my mortgage company will be crying over, not me. I have fixed rate mortgages.
I personally find it annoying in threads like these where people (mostly from NY or CA) post about "hey, that $ will get you a shoebox in my city!" no one asked you about your city...
How much rent will you get from each of those house? What type of people will rent those area? How safe are the area?
From my experience and based on Metro Detroit, I would say; $15K houses are in bad neighborhood. you are attracting people who are low income or surviving on welfare program. The houses are old, you will need to fix it often. If their benefit goes away or job goes away, which it could due to low skill jobs not being very stable, you will have to evict often. Lot of hassle, more houses = more hassle. Don't do it
$75K houses are in inner city suburb that is bordering the city. People here are similar to the top category but have stable income or 2 family income. Lot of people moving away from the ghetto & this is the next best thing. Might not be in good school district. Might get you more bang for your buck depends on the tax
$150K house probably is in safe inner city suburb. People here are middle income community. They might not have any saving but have skill job that are secure. Houses might be slightly newer. This will require least amount of work. if you are looking for passive income, go with this option. You will still make some money
I paid 18K for this small bungalow in North Central Phoenix. Could have rented it out for 600+, considering 1 br apartments are 700 per month close by, with no yard for the doggie.
KeraT +1
My question to OP is are you prepared to deal with 10 toilet, roof, plumbing, heating, cooling, stove issues that will be more prevalent in (15K) low income properties? You WILL HAVE CALLS EVERY MONTH to fix something or are you rather just be reponsible for matance on 1 or 2 properties with maybe occasional call for small leak. ....
What income taxes would you pay? Or are you talking about property taxes? Your going to pay property taxes no matter what just for owning the property. Or are you talking about the lack of a right off on your regular income from the mortgage interest? I am pretty sure the interest itself is more than any tax savings, unless your making a quarter million a year from your day job.
Quote:
Originally Posted by Lovehound
You don't use your $150K to buy the house. You use part of it as down and finance the rest. In fact if you buy with no mortgage you have no mortgage payment to deduct from your rent and you pay income taxes up the nose.
$150K in Phoenix would get you two 3BR 2BA, including master bedroom suite with separate bath & shower, kitchen with full appliances, open plan, built about '95-'00, 1700 sqft, 7000 sqft lot, 2 car garage, play pool (that's just a swimming pool a bit too small to have a diving board, big enough to lap, maybe 7-8 feet at deep end). Cost you about $63K each (25% down, 4.75% APR) including closing costs and fixing them up to perfect condition, and you'd still have $25K in change as an operating capital.
You would get about $1,400/month rent.
Insurance about $1000, taxes about $1300, HOA about $25-$50/month, mortgage about maybe $950 = $1,200/month.
Yeah, you're saying all that and I only get $200/month cash flow? Don't forget mortgage pay down and likely profit some day when you sell it for more than you bought it for.
Also keep in mind that the numbers are off the top of my head, and I'm worst casing it. I expect to get about $250/month positive cash flow after taxes and also my mortgage pay down. (I didn't add home warranty or maintenance either.)
The cash flow is the tip of the ice burg. The huge bulk under the water's surface is the mortgage pay down plus capital gains some day when you sell the house.
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