How Should I Structure My First Rental

5 Replies

Hello Everyone. 

So I am new to this investing idea. However I have spent as much time and effort that I have learning, reading, and ingesting everything that I can. I am a small business owner in the Nashville area. I am an owner operator and a father of a 6 month old and almost 2 year old. As you can imagine I am a busy person. 

I currently own a 3 bed 2 bath home in Mt. Juliet TN about 20-25 minutes outside Nashville. I am about 5 minutes from great shopping and all that the area has to offer.  As this area is growing super fast, I am considering using this home as my first rental. So I will give some details and some analysis I have to this point. Any input would be great!

amount owed on loan-$185k-(FHA)I have done some light rehab to update andI am considering putting 20k in and refinancing to conventional 30 year to lower the payments. House is worth 245k now. 

The home sits on .83 acres (Big yard!)(thoughts?) the schools less than 1 mile down the road are some of the best in nashville in fact they got a 10 out of 10 rate last year.  

Numbers 

home value

20k down

loan amount 165k conventional 4.5%                            Rent-$1600

PMI-$45 Cash Flow-$237

Insurance-$50                                                                      ($397 self manage)

vacancy-5%

repairs-5%

cap ex-7%

management-10%(being my first i would self manage)

If this is a good deal. Where would I go? How would I be able to finance my next home to take my family to? 

Thanks guys 

I don't know if this is a good deal or not. For you it might be.

165k at 4.5 over 20 years is 1044/month

That leaves you 556/ month for operating expenses.

Insurance and taxes will be around 2k/year is my very vague guess, so 167/month.

That leaves 389/month for everything else. 

I don't know? Is that a good a deal for you? I can't say. If you are happy with those numbers then the answer is it's a good deal for you. 

Only thing I'm going to add is that you are looking at an interest rate of closer to 5.5%

Another thought... since you have such a large yard, would an ADU in the back yard or adding an apartment garage make sense? In many ways, this is the ideal set up to get your start in REI. Airbnb in the high season, short term corporate rentals in the low season. Since you are living on site, you can keep a close eye on things and easily self manage.

I appreciate those tips. does Airbnb have success this distance from the airport? I am about 15-20 minutes from the airport and 25 from downtown Nashville. I have played around with the idea I am just clueless on how to structure it. lol