# Calculation Check - First Rental Property

3 Replies

Hi all!

Very excited to get started here and hope I am not pulling the trigger too fast.  This is my plan.

Luckily I bought my primary residence 3 years ago for \$335,000 and I owe \$306,000.  It is currently worth \$450,000 since I moved into a developing neighborhood in Philadelphia.  My mortgage is \$1700/month and my realtor is telling me I can rent my home easy for \$2500/month.  It was brand new construction 3 years ago - very little maintenance.

I applied for a HELOC loan and still waiting for this to finalize. I should have access to \$100k when all is said and done.

I was going to rent my primary home until I found an investment property that currently has renters near a major university.  This home is 2500 sq ft and totally renovated with renters paying \$2500/month currently until July 2020!  I believe it will always be occupied since it is 3 blocks from a major university.  Also students can use student loans to pay for rent - the student loan bubble could benefit me here..

They are selling the home for \$309,000. I am going to put 20% down from my HELOC to avoid PMI. Also closing costs are around \$15,000 or 5%. I am of course going to try to get this property for lower hopefully \$295k-\$300k. Also will try to negotiate the closing costs with the seller. It appears they are aggressively trying to unload this property.

Home = \$309,000

HELOC = \$61,800 Balance (assume 4%)

\$2472/year in interest or \$206/moth

Mortgage Loan = \$247,200 (assume 4.5% because it's a rental)

30 Year mortgage pmt = \$1253

Closing Costs = \$15,000

Property Taxes = \$3,800/year

Rental Income = \$2500 x 12 = \$30,000

Monthly Income = \$2500

HELOC Interest = (\$206)

Mortgage PMT = (\$1253)

Property Tax = (\$316)

Landlord Insurance = \$2500? (i have no idea) or (\$208)

Positive Monthly Cash Flow of \$517

Would love to hear some feedback on my calculations or where I am going wrong on this.  Open house is on Saturday and hope to have my pre-approval letter ready and could be making an offer.  Any advice/recommendations are greatly appreciated!!!

If all said and done I would rent my primary residence now for \$2500 (current mortgage and taxes insurance) is \$1700

Positive Cash flow of \$800 already

Will buy a new primary residence and rent out current.

Does this sound like a wise strategy as well?

@John McCardell , I’m confused as to whether you are planning to rent out your current primary residence or the new prospect near the university?

Hi John,

Thank you for posting this. I am currently taking a similar approach with renting out my primary residence. I am renting in the area that I want to live, and have a HELOC approved. I am just trying to find the right property to invest in. Very curious to hear other responses. Thanks again!!

The first deal is renting out the university house. After I’m finished with that I will rent out my primary residence. I should have been more clear.