First Investment Property - Should I Jump?

Question

Hi - I'm seeking advise from those of you who've done this before.  This would be our first income property.  It is in my college town and we would rent to students which I am okay with. Paying 182k for the home, rent is 2k a month conservatively.  We would get someone to manage and lease it for 10% of the rental price.  It falls at 1.2% for the purchace price to rent ratio, and my income to expenses (without morgage) is 34.5%.

The house has been recently remodeled with a new roof, new HVAC, new windows, new siding. Haven't had an inspection yet.

Would you do this deal?  I plan on hanging onto it for a long time.  I live in San Francisco and am not familiar with other cities besides my college town.  I unfortunately can't afford anything in the cities I know (LA and SF).

Advise is MUCH appreciated :)

Best,

Gracie

Thomas S. · Answer

Every thing aside from your expenses looks OK. Long term you will be in the 45% range on expences if everything goes well.

Grace O'Rourke · Answer

Another question - I'd like to finance this house myself (without my husband) to free us up for another loan under his name should we want to.  Does that mean we need the property deeded only in my name or is it okay if it is deeded in both of our names?

Grace O'Rourke · Answer

Thanks @Shane Cummings - yes, I did put it into the Rental Property Calculator, which gives me hope.

@Mike McCarthy - I have not seen it, however I know lots of work has been done on the property.  The seller is trying to purchase another property so she needs the cash which is why it's priced to sell. The seller also got it for a great deal so she's definitely making money on it.  My dad is going out to get eyes on it next week before we close.

Shane Cummings · Answer

@Grace O'Rourke - have you tried running all of the numbers through the Rental Property Calculator under the Tools  tab?  Members get five free calculations.

The numbers and details you gave on the property make it seem like it would be a good deal.  But I would make sure you take into account all expenses (taxes, insurance, property management, repairs, CapEx, etc.) to determine monthly cash flow.  The calculator will help you do this.

Good luck!

Grace O'Rourke · Answer

Thank you Henri for writing back!  The house is very well priced for the area.  I think just buying and holding would give us some profit, but we are purchasing it for Cashflow.  This home unfortunately is not in California, it is in Ohio.  Our mortgage is a 30 year term - cash flow according to the bigger pockets form is just under 6,000 / year - not much but at least thats more money than 0 dollars a year.   I calculated that with very conservative rents as well.  I think we could make up to 10k a year off it.

Henri Meli · Answer

@GRACE O'ROURKE What's your goal in this investment ? Buy and Hold or Cashflow? What type of loan term you have and what would be the expected cashflow based on the loan terms? $2,000 rent on a $180k asset sounds about right from a cashflow standpoint. I'm assuming it is in California. You could get good appreciation too.

First Investment Property - Should I Jump?

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