Here is my situation: I am not a U.S. citizen but I am studying here under F-1 visa. My plan is to buy 3-4 apartment houses and rent them. I am not planning to apply for a mortgage and the payment will be all in cash and will not sell the houses for the good part of the next 10 years. The target apartments are about $100k to $150k, mostly 2 bedroom 2 bath apartment buildings (in the city of Pittsburgh, close to University of Pittsburgh and Carnegie Mellon University to be precise. My plan is to rent them out to students who are studying in either university). Each house will be rented somewhere between $1000-$1500 with an average around $1200. Now I have a bunch of questions that I have somewhat of an opinion about their answer but didn't really know if I am right:
- What would be the type of taxes I should expect? Correct me if I am wrong but each house would have about 2% of the market price as property tax (so roughly 2.4k), and the federal income tax would be around 25% of the income (since it pushes me to the third bracket) which would be $3.6k ($14.4k x 0.25). Assuming that there will not be any other tax costs, this leaves me with $8.4k per year per apartment (approximately).
- How is the insurance cost calculated? I have no idea but I am assuming that this is also a key player.
- How is the house price increase going to act as another source of income? Pittsburgh is expected to have a 6.1% increase in house prices which almost all of it is going to be pure profit. Is there anything that I am not accounting for? (except for small increase in property tax which will be cancelled out with rent increase. Also increase in rent will increase the federal taxes slightly but that is really marginal so overall it should be pure gain)
Please let me know if I am calculating anything wrong but my projection for one year is about $8.4k per house (assuming no maintenance is needed)