Should we buy 2 homes or 1??

Question

Hi!

We have about 39,000 to put down on another rental. Should we use leverage and buy two homes at a lower price or 1 home at a higher price. After researching I believe we can bring in 200 a month above rent on each home, regardless of how many we buy so I'm leaning towards 2. What are your thoughts and experiences?

Rachel Shepherd · Answer

Sure. The single home would be about 145,000, 3bd 2ba at 1100 sq ft. We would put the total 39,000 down and the payment would be about 625. We could rent that for about 900 at least. Maybe 1000.

The other two are

79,000 2bd 2 bath at 1100 sq ft. We would put 15,000 on it and bring the payment down to 420. Rent would be about 750 a month.

89,000 2 bd 1 ba at 850 sq ft. We would put 18,000 on it and bring the payment to about 440. Rent would be around 750-800.

Does that help?

Rachel Shepherd · Answer

It does include taxes and insurance. My hope is that we can hold onto these rentals long term and in the end have a positive cash flow when they are paid. Even if there is no money coming in now after mortgage is paid and repairs are made or unit is vacant for a few months. Mainly we are looking at long term. Thank u so much for your insights.

Jacob Sampson · Answer

Just a little advice that you didn't ask for.  Those purchase prices vs rent don't leave a ton of room for any long term cash flow.  That would concern me.  You know the area better than I do and it sounds like you have at least one other rental, so take it with a grain of salt.

Jacob Sampson · Answer

Option 1 has $625 in manditory outgo and say $950 in income.

Option 2 increases manditory outgo to $860 (or 35ish%) and an increase in income to $1500 (or 50ish%)

Based on what we know option 2 increases income by a greater % than it does outgo.  Seems like a decent choice.

Does your payment include insurance and taxes?

Rachel Shepherd · Answer

Anyone else? We are looking at these homes in a couple hours. Thanks!

Jacob Sampson · Answer

Can we get some details on all three properties?  These sorts of decisions are usually case specific.

Should we buy 2 homes or 1??

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