I have no idea if this is the correct section, so please let me know if there is somewhere better I should post.
Background: I am currently 23, military, and deployed the Afghanistan. I make roughly $4,400 per month, and have next to no bills for the next year(100$ or so per month). My credit score is roughly 760, and I have about twenty thousands dollars in savings. I really wanted to get involved with rental properties.
At the moment I have the opportunity to buy a 2 bed, 2 bath, and 1200 sq. ft. home for $65,000 in a nice cul de sac. That is located in a medium size town (60,000-70,000 pop.) that has a very decent military presence. Similar homes in the neighborhood are renting for about $900, and this home is in very decent condition(no major renovations are needed at the moment). The current owners have already receive a couple of offers from people that would like to rent, however they would prefer to sell the property due to starting a family and being ready to upgrade and build a new home.
If there are any more details I can provide, please ask. I sincerely need and am open to any and all advice that you guys can provide. I really think this would be a good purchase, but I would like to know the thoughts of others.
With it being your first deal, I recommend that you learn enough so that you can easily weed out crappy opportunities and wait for something that is an obvious "yes." You don't want to lose money even if bad things happen like vacancies, evictions, leaky roof, etc.
I'm assuming you know the area...is the $65k a discount to comparable properties nearby that have sold in the last year?
Do you know or have a good idea of the expected expenses, like mortgage principal and interest, taxes, and insurance? Would it still cash flow if you had 12-15% vacancy, 10% property mgmt fees and $150/mo in repairs? I'm not saying you should expect that to happen, but you want to plan for the worst.
Do you know any good property managers in the area who can take care of the mgmt for you?
Are there any repairs that would need to be done right away, or are they minor ones that you could pay for over time with rental cash flow?
If you end up getting it under contract, you need to find the most anal, detail oriented inspector to go over the property, someone who will take detailed notes and pictures for you. It's the best money I've ever spent...usually runs about $350, and has saved me thousands in headaches and future repairs.
Thank you for your reply, this propery does seem like an obvious yes, but I want to be sure that I am not only looking at the positives, but the negatives as well. The $65k is a little on the low end of what similiar property has sold for in this area, the home sold for $85k near the height of the crash in 08.
At this currenty point in time, and for the foreseeable future, I would have no issue if the home were to remain vacatan, or if their were sudden large repairs that needed to be done. Due to being to deployed, and having no bills, I expect to have near $60k in cash saved up within the next year(not including the purchase of this home). So I will be able to set aside a large justincase fund for the property.
I expect to rent for $750-850, and to pay the property manager 10%. The loan, including insurance and taxes should run me about $400-450. So on the conservate end, I should make $675 from rent (10% off due to property manager). Which should give me flexibility to save for money for any repairs that may arise. I would have no issue putting at least ten thousand down on the loan, and throwing another five to ten thousand into the account to use for things such as repairs, or vacancies.
At the moment, the only repairs would be the most minor cosmetic repairs, everything seems to be in great working order, and sending in an inspector before the final purchase would definitely be a must do, just incase there are any serious issues with the property.
Thank you for your service! My husband is active duty so I totally understand your goal to turn your income into a passive cash flow for when you get out. That is our goal too!
Those number look great! Here's the thing. Do you really want to deal with it while you are over there. I handle everything for our family and even with me state side it can be a hand full! While I would NEVER change it for a moment, self managing all over the country has it moments. While you have a property manager it still will have its moments because no one cares more than you do about YOUR homes!
If you don't want to just save and buy when you get back. Than that looks like a great start. Just remember that there is ALWAYS a learning curve! So just get started! Expect that there will be issues and go from there :)
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