First Rental- Advice

2 Replies

Originally i had asked about renting out rooms of my SFH I purchased but circumstances in life changed and I will be renting the entire place out as of September 1st.

5% down on $170,000, bi-weekly payments of $380 =  $760/ monthly
Insurance and taxes of $300 monthly

Renting for $1200 plus all utilities.

Leaving me $140 a month for all miscellaneous: repairs, vacancy, etc. I wont be cash flowing really but the property should ultimately pay for itself most months.

I will be continuing to live at home and not have a monthly expense for such as my parents are the sweetest. 

Therefore, I have the question: 

Should I pay the mortgage out of my own money, acting as if I had the mortgage with no one renting, and then setting the rent aside in a tax free savings account. After insurance/taxes I will have around 10-11K in a year saved up from the property alone (if nothing goes wrong). $760 a month is about 1/6 of my monthly net income and therefore very manageable. I will continue to save roughly 1/3 of my income as well for my next property.

OR

Use the rent to cover mortgage and expenses and just save my income.


In the end i suppose it is the same outcome, i am thinking however, paying my mortgage and putting the rent directly into a savings account would be a smart, efficient way to save.

Any thoughts?

@Joey Sargeant good question!

Is the property newer or older? Did you do a lot of improvements? If you're expecting a major repair (roof, AC, foundation, etc.) then I would start saving for that now. 

It's personal preference but I like to set aside $5,000 above and beyond taxes and insurance before I start taking any money. $5,000 will almost cover any major issues as well as any insurance deductible, vacancy, etc. 

Good to see you're thinking ahead! 

Best of luck!

Built in 70s. I have done some minor cosmetic work: painted, flooring and some landscaping but nothing even close to major. It will need a roof within 3 years.

Funny- I have exactly 5,000 in an account designated to this property. 

Thanks Cameron!