South Orange, NJ · Member since 2014 · 12 posts · 0 votes
Greetings, and Happy Holidays to you all!
I'm highly considering a property, selling for $350k, 100% occupied, $3k/month, i.e., 36k per year. Mortgage 2k/month.
This is my first property, so I'm being lead by a guru (who I will not just rely on as Mr. Turner suggest). I'm doing a self-appraisal based on comps, and will be having an independent inspector do a walk-through with me.
Is it more reliable to try to get in a duplex to occupy myself? Or does it not make a difference? Additionally, is it difficult or impossible to do a similar transaction a year from now? How long would you wait? How do I find out the class of property i'm investing in? The property will be most likely section 8.
Thats not a particularly good deal. Don't even think you're going to make $1000 a month. A few hundred, maybe, after all expenses, capital and vacancy, if you manage it yourself. Using a property manager you'll do good to make $100 a month, over the long term.
Living in the property gives you the ability to get a low down loan, if you otherwise qualify. That's the big advantage.
How soon you can buy another depends on you. Lenders won't consider rental income until you have two years experience. A lender will use the calculation (75% * rent - PITI) to determine net rental income, so a deal like the one you describe is cash flow positive by that measure. But until you have those two years you'll have to qualify for the loan using other income. If you have enough income and cash for the down payment and reserves you could buy another one the day after you close on this one.
You find out the class of property (which is a much looser measurement than it sometimes seems) by going and looking. Drive the area. Look at the building. Other posts give descriptions of these A to D classes for both properties and areas. Its not really crucial to put a label on it. It is crucial for you to understand what you're buying and that you're comfortable with the area and property. If you think "I don't want to be here after dark", think twice. If you think "I don't want to be here at all", then keep looking.
Thats not a particularly good deal. Don't even think you're going to make $1000 a month. A few hundred, maybe, after all expenses, capital and vacancy, if you manage it yourself. Using a property manager you'll do good to make $100 a month, over the long term.
Living in the property gives you the ability to get a low down loan, if you otherwise qualify. That's the big advantage.
How soon you can buy another depends on you. Lenders won't consider rental income until you have two years experience. A lender will use the calculation (75% * rent - PITI) to determine net rental income, so a deal like the one you describe is cash flow positive by that measure. But until you have those two years you'll have to qualify for the loan using other income. If you have enough income and cash for the down payment and reserves you could buy another one the day after you close on this one.
You find out the class of property (which is a much looser measurement than it sometimes seems) by going and looking. Drive the area. Look at the building. Other posts give descriptions of these A to D classes for both properties and areas. Its not really crucial to put a label on it. It is crucial for you to understand what you're buying and that you're comfortable with the area and property. If you think "I don't want to be here after dark", think twice. If you think "I don't want to be here at all", then keep looking.
You should run fast and far. $3k a month rent with $2k a month mortgage leaves 1k a month for taxes, management, insurance, vacancies, repairs, etc. Your chance of cash flowing is nil.
You are jumping the gun on planning your next purchase. First make sure the one you're working today will be profitable.
Adam... Have you run the property through the BP Analyzer yet? If not, you should to get a feel for assessing whether or not you have a lemon or PIG (Passive Income Generator).
I've been looking up properties online and running them through the analyzer and right way I get a feel for whether or not the property will cashflow. The ones that don't goes in the waste bin and the ones that do I look into further by calling up the listing agent or owner and getting more information on it. Give it a try if you haven’t done so already…
The other BP guy here have given you a great deal of information to move forward.