New answers tagged rental-property
1
First, you should be looking at the cash flow as well as the profits. You are making $91/month in profits, but because you still have to pay the principal part of the mortgage, you actually have a negative cash flow. If you refinance to a 15-year mortgage, that effect is even more pronounced: your cash flow will be worse (because you have to pay more in ...
2
This is how I see the calculation:
My projected rent is: $1850
now the expenses:
My monthly expenses would be: (my current mortgage split is 649
(interest) + 412 (principle). I am including the interest part as an
expense)
Mortgage : 649 (interest part)
HOA : 510
Property tax: 352
Estimate of monthly repairs : 100
Don't forget ...
3
You're overlooking some huge tax considerations.
Deducting mortgage interest
First, you get to deduct the interest, taxes and insurance on the home, because it's your primary or secondary home. So I see $1001 of interest and taxes, armwave $99 of insurance, and that's $1100/month or $13,200/year of deductions.
(By the way, if this is news to you, you ...
5
The only way to see the full picture is to create a spreadsheet with two sides:
On the first side, map your income from the investment property over the years, including everything down to potential vacancies, repairs costs, and closing costs
On the other side, map how much you'd make by selling the house at a given point of time and investing the remainder ...
19
Is my calculation correct?
More or less. Your list of expenses is not complete and repair/maintenance expenses can vary wildly. You'll also depreciate the house (not the land), so with your current numbers you could be running a loss for tax purposes which can offset income tax on other income and basically act as a discount to your cost of equity, so ...
4
Three additional things to consider.
(1) Are you planning on buying a house in the new town you will be moving to or are you renting? If you choose not to sell your old house and buy a new house you will have less money available for a down payment, which will result in a longer mortgage at a higher interest rate.
(2) This assumes you will be able to have ...
6
Without knowing your financial goals, income, other assets, etc, I can't make a recommendation. For example, do you have a sufficient emergency fund to cover both the expenses for this home and your new one should you lose your tenant and/or your job?
However, one part of the calculation you did not mention is tenant turnover. Does your projected rent ...
33
Does it make sense for me to keep the house
Are you willing to be a landlord for $91 a month? What happens if your house goes unrented for 3 months? 6 months? How will you pay its mortgage?
In my opinion, you don't have enough buffer to make this worth the risk. If you could afford for it to go unrented for 6 months then it might be a good investment in ...
1
Sorry, this isn't really an answer. I don't have time or space to enter all of my experience in investing in different ways. I have been a landlord, hated it. I got out of it at a small loss. Had one or two good tenants, had 3 bad to horrendous tenants (the last one failed to pay me, ever, and then when finally legally evicted ripped out all of the drywall, ...
1
There's a 27% chance that someone with a 640 credit score will become seriously delinquet in the future. (Source).
Do a cost benefit analysis.
(Extra income gained by renting for the whole year and not paying an agent fee) - (0.27 x Potential cost/loss due to eviction) = ?
If it's greater than 0 then rent to the barber, otherwise rent to the students.
...
4
"Why is this positioned as the only (best) way to build wealth?"
Because it's sold and marketed that way - various parties stand to gain a lot by you investing in property - essentially they can take their slice of the pie with minimal exposure while you shoulder most of the risk. But, the success stories are real because the real estate game provides easy ...
6
What is the truth about this?
Only partial truth. Investing in real estate is a bad idea for many reasons:
Houses depreciate at the same time housing market appreciates. If you buy a house that is 20 years old, 100 years from now it will be 120 years old. Probably old enough to be demolished. Housing market appreciation happens because it's the market ...
3
The thing with property, is like any other portfolio, you ought to diversify. And most people can't afford to diversify when they start in real estate.
Real estate investments can be good. I sold an apartment that had been paid for entirely with the bank's money, whose interest and other costs had been paid by the same renters from day 1 (and who decorated!)...
18
No. You have an overly pessimistic view of holding a job, an overly optimistic view of real estate investment, and you don't even mention other alternatives.
Sure, you could get laid off from your job. That's stressful, but it's hardly the end of your life. Get another job. If you have marketable skills, this can be quite easy. I was fired once, and I got ...
54
Several other good answers that get into the details, but I think there are a few obvious things that need to be said here:
Real estate isn't a risk-free golden ticket - investing in real estate involves a lot of risk. It's easy to fail at it, and then you have nothing to fall back on.
Having a career with a skilled job isn't as dismal as you've made it out ...
9
I get the appeal of real estate investing and it is a big part of my retirement strategy. I like owning property because it is a thing I can go and interact with, it feels more permanent and real than the numbers in my retirement/brokerage accounts.
The fact is, though, plenty of people retire happily owning no investment properties. Being prepared for ...
39
The sales pitch:
A few decades ago, I had a friend that was starting out in real estate investing. He explained his reasoning like this:
Buy a starter home. Get a decent house/condo with the best rates because it is an owner occupied purchase. Live there for 5 years.
Buy another house, get some renters lined up for the first place. Renters cover the ...
62
What is the truth about this?
Pretty much no truth.
At 48 years old, I received an offer for a job where I was paid far more than any other employment I had previously. I chose it over two other competing job offers that were offered at a very similar time.
While I was laid off from that job, rather abruptly, I had a new job within a short time at age ...
97
I think this might be an instance of "survivor bias" in that you only tend to hear from the people who were successful at it and made a lot of money off of it. Conversely you don't hear as much from the people who lost their shirt trying to flip a house or those who couldn't secure tenants at a good price.
If you're interested in the idea of passive real-...
2
SDLT applies to most residential property sales, with some variations and exemptions. There is no exemption to SDLT for living in the property for a certain period of time (you might be confusing this with capital gains tax, where a practice known as flipping was used prior to selling in order to avoid it).
If you already own a home and it wasn't sold ...
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