Rental Properties & Breaking Even
Hi,
I am new to real estate, reading what I can, watching BP webinars, etc. I have yet to decide on the route of REI I want to take, but I'm positive it will be in the residential rental market.
I am having trouble grasping a concept and it may just be because I haven't read enough yet to have it click.
It seems it would take quite a while to break even. For instance:
House: $140,000
Total out of pocket: $40,000 (down payment, closing and rehab)
Assume a $500 cash flow, which, from what I have read seems like that is optimistic.
From those numbers it would take 6-7 years to break even. That's obviously assuming you don't take into account appreciation.
To me that's a long time to $40k, and if I want to do what I see so many other people say, buy one rental per year, that's a lot of cash being floated before you are in the black.
I have seen articles on cash out refinance, but you would still need to have enough equity built up to stay within the LTV for the refi, right?
When we are ready for our first buy, we will likely use our HELOC from our primary residence for the down payment, but pulling cash out of the rental to do the second buy would require substantial appreciation (in theory). Not to mention, it would compete with needing to pay the HELOC off.
Thanks for any insight.