I am looking at a 3/3 home with HOA in a prime location. Made in 2005. Very nice community. Its near all the big oil companies and the university. I put 25% down payment. It looks now that I will be upside-down $150. Look monthly rent will bring in $1400-1500. With HOA included my monthly looks around $1650. I know I will probably pay this house off within 5 to 10 years. Is this worth it, or should I back out of the deal? My last rental home (room rentals), I was positive $500, but neighborhood went down the drain so I sold it. Not used to being upside down. Please advise. This will be my first actual investor home.
No. Don't buy it. Put your track shoes on and run. Nothing, and I mean Nothing you said, tells me anything positive. You sound like you're just trying to rationalize the negative cash flow. This would not be an investment. This would be speculating at best.
If you pay it off in 5 years, that means you are out of pocket for the entire cost of the property. So, with that said, after the payoff, what would your cf be then?
Take that amount and divide your total cost by it, in other words, how much cash you put into it. That's how many years it will take to break even...and before you start making a profit.
Don't bother to bring up the 100% equity. You bought that equity. You didn't earn it. That equity was an cost, not a return. You used your money out of the bank to buy it. That money would be worth the same in the bank, as it is in the equity. You've gained nothing. All you would have done is pay for all your negative cash flow up front.
Yeah. Thanks. I'm gonna back out of this one. There is another one for sale already rented, gonna try to get it at a cost where I am not paying. Thanks for the advice. I am a newb. I have lost so much on the stock market, I decided to just stick to rentals. I guess that -$150 blinded me because I have lost so much more on stock market / bitcoin.
Investing in RE is nothing like investing in the stock market. If they are (when you invest), then you're doing it wrong...and you're probably leaving all kinds of opportunities (money) on many tables.