First Time Considering Rental Properties

[Account Closed]

Hi! I'm a total beginner here, so forgive my lack of expertise. I just joined the site and I'm about to watch the intro webinar. Some older friends of mine have moved on from their first homes and now rent them out for extra money. It seems to be going pretty well for them and I want to get in on the action by buying a couple homes that just went up for sale in my neighborhood and renting them out.

I live in a small community surrounding Brady Lake near Kent, Ohio. It's tucked away less than a 10 minute drive from Kent State University. I bought my 900 sqft house 7 years ago for $60k and now according to Zillow it's worth $95k. I still owe $40k on my mortgage, but according to my math I have about $55k in equity so far. The house directly across the street from me burned. It didn't burn to the ground, but it's totally unlivable. The house next to it just went up for sale for $95k and the neighbor directly next to me just listed his for $125k. Both houses could use a little care, but they seem to be in good shape. I don't know much about the rental market in this area, but I know that at least three houses on my street are being rented.

I'm entertaining the idea of taking out a HELOC and putting $20k down on each of those two properties. Then, if that goes well, I could possibly buy the burned house and have it torn down. It's a real eyesore, and I suspect that the owner didn't have insurance on it, so it's just sitting abandoned now. If I buy it, then I would own a little block of four parcels. The downside: I'm not handy when it comes to fixing up houses, and I have no idea how to navigate the business side of managing rental properties (e.g. How do I write a contract? Do I need an LLC? How does insurance work? etc.) I also have a full time job, so I don't have much time to spend on this. Does this strike you as a good idea or a bad idea, and what would I need to look into as far as next steps?

Thanks for the support, everybody! Looking forward to learning a lot.

[Nathan Gesner]

Quote from @Account Closed:

The bank will only loan you about 70% of your equity. With $50,000 equity, that gives you around $35,000. Keep in mind that is borrowed money with interest, so you'll be making payments on that borrowed money. Then you put money down to purchase the other property and you'll be making payments on that. Then you need money to pay for the improvements.

I would consider trying to buy one property. See how well you can manage one before you start taking on bigger projects like a burned down eyesore.