New to Real Estate · North Vernon, IN · Member since 2019 · 3 posts · 0 votes
I’m probably going to buy the house across the street from me and then rent it to my daughter and her family. The plan is they’ll buy it from me in a year or two, once they’re credit worthy.
I thought it might help me get my feet wet in the rental world while helping her out.
If it were just a straight up investment I don’t know if it would be profitable.
So here it is:
3 bedroom, 2 baths
$84,000
20% down plus closing cost
My mortgage with taxes & insurance will be about $520
I am borrowing the money for the down payment from my 401k. That payment will be $320 for 4.5 years
This house would rent for $800 - $900
I’m thinking once the 401k loan was paid off the house would cash flow.
Rental Property Investor · Shakopee, MN · Member since 2015 · 985 posts · 374 votes
7y
Personally I wouldn't. I need a minimum of 250 per month cash flow. To each their own though. I know other people that have done similar deals where it's barely break even.
What's your exit plan? Say your daughter and family decide after renting for 2 years they don't want it. My concern is you leave so little cash flow that if something breaks it could be a cause for concern.
New to Real Estate · North Vernon, IN · Member since 2019 · 3 posts · 0 votes
7y
@Brent Paul That’s exactly what concerns me too. My exit plan would be to sell it or raise the rent to get the cash flow. Another option would be to sell it on contract to someone else if they had a large down payment. I’m not sure if the bank would let me do that while I have a mortgage on it though.
By the way, $250 cash flow sounds awesome. Do you put a lot of money down to get there?
Rental Property Investor · Shakopee, MN · Member since 2015 · 985 posts · 374 votes
7y
@Ron Marion I am putting 20% down to get that kind of cash flow. But I am pretty picky on the types of properties I take on. I got overwhelmed with my first property needing so many repairs. Now I try to go in a little more prepared.