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For all the seasoned real estate investors and landlords, I want to present my numbers to you to see if this is a good investment or not.
I want to start renting out my townhome. This has been cleared by the HOA and the lender.
My mortgage is $980 and my neighbors pay $1675 in rent for identical units as mine. The going rate for rent in our townhome community is $1550-$1675.
I want to start investing in rental property and save up enough cash to buy a future rental property in cash. I figured what better way to save money and gain experience than renting out my own home?? Someone else paying my mortgage, thats great right? Will get me on the path to my financial goals right?
While I rent out my townhome I will have to search for a new apartment, $850 is my max that I am willing to pay.
Landlords/Investors: Please tell me the pitfalls and holes in my plan. Are my numbers too good to be true? Am I missing something? It can't be as simple as Rent minus Mortgage = Profit. If you were presented with these numbers, would you do it?? Thanks!!
You'll have to compensate for the upgrades you'll have to do when old tenants move out you get new tenants. I would also make sure you require that your tenants carry renter's insurance. But I don't think your equation is off by much.
where is the profit after you pay rent for the place you will need to move to, and your mortgage on the townhouse, even if you collect $1675 in tenant rent? You will be losing your homestead tax exemption on the unit if you don't reside there and so (if you escrow taxes and its included in your mortgage) your mortgage will go up.
where is the profit after you pay rent for the place you will need to move to, and your mortgage on the townhouse, even if you collect $1675 in tenant rent? You will be losing your homestead tax exemption on the unit if you don't reside there and so (if you escrow taxes and its included in your mortgage) your mortgage will go up.
Good points. The OP is probably only looking at net profits of around $300 or so per month, if that.
Good point Squirl. These are things I need to weight out.
This is a long-term property, will hold for well over 30 years.
There is currently a tax abatement on the home good for another 5 years, not sure how that compares with the homestead exemption loss. I also understand I'll lose the capital gains tax exemption on the home if I sell. Hmm...I should talk to an accountant about that to see if its worth it if holding for a long time
Ok here's my real numbers breakdown:
Rent: 1675
Mortgage: -980
Profit: =695
I will pay W/S/G: -205 *Based on highest Usage+$50 for safety.
Profit: =490
Safety Margin 20% of Rent: -335
Final Profit: =155
New rent: -850
= Paying $695 out of pocket to have both a townhome and an apartment. That's not too bad right?
I am more curious as to how other investors/landlords do it, I mean, without the safety margin I'm still only looking at $490 profit before new rent. Is this how it is starting out? How does anyone make any money in this?
Good point Squirl. These are things I need to weight out.
This is a long-term property, will hold for well over 30 years.
There is currently a tax abatement on the home good for another 5 years, not sure how that compares with the homestead exemption loss. I also understand I'll lose the capital gains tax exemption on the home if I sell. Hmm...I should talk to an accountant about that to see if its worth it if holding for a long time
Ok here's my real numbers breakdown:
Rent: 1675
Mortgage: -980
Profit: =695
I will pay W/S/G: -205 *Based on highest Usage+$50 for safety.
Profit: =490
Safety Margin 20% of Rent: -335
Final Profit: =155
New rent: -850
= Paying $695 out of pocket to have both a townhome and an apartment. That's not too bad right?
I am more curious as to how other investors/landlords do it, I mean, without the safety margin I'm still only looking at $490 profit before new rent. Is this how it is starting out? How does anyone make any money in this?
were are the HOA fees at and you will lose your ass with the numbers you gave.
All yes I said all my properties rent for 2% of the total purchase price that’s all my cost to buy the property. The last property I bought for 39K closing 1k clean up 3-4k now rents for 1010 a month.
I never leased out a property unless there was profit. If it costs out of pocket to live someplace else, doesn't make sense to me unles you are relocating out of the area and you are deciding should you sell or hold. Otherwise, I can't get to the logic because you will be in a negative cash flow situation $650 p/m. Why not just live there and experience living with a negative cash flow of $650/month by increasing your savings account? Some tenants fail to pay rent and/or damage your property; being a landlord is not always easy. Just imagine going negative each month $650 and then having tenant who stop paying? If you save a couple of years that $650, you can have a downpayment for another investment condo.
LOL, thats a wonderful idea. Put myself on a negative cashflow of $650, I suppose it would help with my goal all in the same, to buy my next property cash. That's pretty good, it's funny but so are my novice RE ambitions I would lose out on the experience but better than losing out on $$
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I would lose out on the experience but better than losing out on $$
