Updated almost 7 years ago on . Most recent reply
Looking for feedback on my plan for starting
I've been doing quite a bit of reading on BiggerPockets in an effort to start learning and prepare for the jump into REI.
With that in mind I'm looking at the angle of using my current house as my first rental property with the plan to buy a new house as my primary residence.
So with that in mind I've tried to do some basic numbers to help me start learning how to judge things. Looking online I'm finding that properties in my neighborhood appear to rent for about 1,600 a month.
With my mortgage payment (this includes the escrow of taxes and insurance) I'm paying 1090.00 a month. Add to that a yearly HOA dues payment of $300/12 months and I have expense of 1111.00 a month.
I'm thinking I should cash flow $489.00 a month.
Ideally I know I should have 10k set aside for repairs and maintenance just in case as well as probably 2 months of rent to float things while looking for a new tenant?
Trying to make sure I understand correctly on this part before I start learning and researching other areas.
Most Popular Reply
Tracy,
Congratulations on deciding to be a real estate investor! Renting out your house and moving to another is a common way to acquire properties when you're starting out.
There are a few more things I'd plan for on the expense side of things that will reduce your cash flow #. Vacancy, repairs and maintenance come to mind. You planned for them in your emergency fund, but put the estimate in your cash flow too. $10k seems reasonable as long as your place is in good shape (roof, HVAC, etc) and you have a way to manage it if it's over $10k (tap other savings, a HELOC).
Before you do it, I'd run a BP analysis on your house to determine if it's a good candidate for a rental. If your house is worth $100k and rents for $1,600, it's a no brainer. Go for it. If your house is worth $500k and rents for $1,600, it wouldn't make sense. You'd be better off selling it to buy 3-4 houses that rent for $1,600 each in a better market (with the same monthly payment as you have now).
Good Luck!
Chris