First rental $1,300/month

19 Replies

First investment property currently rents for $1,300/month with principle, interest, tax and insurance and mortgage insurance at $1,056.35/month. Because of it’s appreciation we now have 20% equity so we want to get an appraisal to get rid of mortgage insurance ($101.24/month). We pay $75/month for landscaping. After we get rid of mortgage insurance our remaining gross profit will be right around $270/month. By summer 2019 I plan to have about $30,000 in saving plus hopefully can get another $30,000 through refinancing to use as downpayment for new property and repairs. Hope to generate at least $500/month gross profit from next property. Thoughts or suggestions?

Don't forget to account for vacancy, repairs, capital expenditures, property management (even if you self-manage, there will likely come a time when you don't want to), and water/sewer (if you pay for them). 

Unfortunately once you account for all expenses you will not have positive cash flow. If the property is in good repair you should not plan on holding it longer than a couple of years. Sell it before the repairs start to come in and with luck you will not go into the hole. 

To cover all future expenses and break even long term your rent will need to be $300/month higher. That will only see you breaking even, likely no positive cash flow. You are negative at the present time based on normal projected expenses with a long term SFH income property..

@Jairo Serrano My thought is that's a horrible deal. I feel bad with people making these kind of monthly profits...listening to too many podcasts about using BRRR method and thinking $200 a month is a win....one thing goes wrong at the property and you are wiped out for years on profit for that unit...
Originally posted by @Thomas S. :

Unfortunately once you account for all expenses you will not have positive cash flow. If the property is in good repair you should not plan on holding it longer than a couple of years. Sell it before the repairs start to come in and with luck you will not go into the hole. 

To cover all future expenses and break even long term your rent will need to be $300/month higher. That will only see you breaking even, likely no positive cash flow. You are negative at the present time based on normal projected expenses with a long term SFH income property..

 Thomas just curious how you break down the costs or what formula you use? I am relatively new to investing in at a glance this sounded like a pretty good deal to me. The other commenters are saying similar things so if others want to comment that would be great too. Thanks

Originally posted by @Thomas S. :

Unfortunately once you account for all expenses you will not have positive cash flow. If the property is in good repair you should not plan on holding it longer than a couple of years. Sell it before the repairs start to come in and with luck you will not go into the hole. 

To cover all future expenses and break even long term your rent will need to be $300/month higher. That will only see you breaking even, likely no positive cash flow. You are negative at the present time based on normal projected expenses with a long term SFH income property..

Thomas your correct but your crushing these poor folks with reality !!!! 

@Thomas S. I don’t think I could rent it out for too much more. Maybe $100 more. I originally bought the home to live in but then decided to rent it out. I am also licensed plumber so can do a lot of repairs on my own. Mortgage is $150,000
@Mark Fries we did not buy this property with the hoa of renting it out at first. We bought t for primary residence and rented 2 rooms out to roommates from school. Now they rent out whole home. $150,000 left on loan. I am also a licensed plumber

He bought the home and lived in it first, and is now renting it out at higher than his PITI. Is it the "ideal" BRRRR? Well, no. But also not sure why the critiques are so harsh. Lupe is on fire on the blogs, and not one kind word can be found. Actually, most of Lupe's comments are quite mean and rude.

@Jairo Serrano I'm assuming this isn't your business, and you are merely renting out your main residence after you moved, and making a few dollars today while you do that. Nothing wrong with that. Sometimes BP can be a harsh place to be when you aren't making the profits of the big boys. It's ok. I'll ask this though; if you refinance what are the real numbers? The interest rates have gone up. For example, my duplex interest is 3.75% locked in for 30 years. At today's rates, refinancing to get rid of my PMI (MIP for FHA loan), my monthly payment would actually go up!! Also, do you live close to the house now? I'd get rid of that $75 a month landscaping and either do it yourself or write into your lease that the tenants are responsible for all landscaping/mowing of lawn. And, providing you do not need the cash today, I'd sock away every penny of the gross profit into a reserve account.

Originally posted by @Anthony Wick :

He bought the home and lived in it first, and is now renting it out at higher than his PITI. Is it the "ideal" BRRRR? Well, no. But also not sure why the critiques are so harsh. Lupe is on fire on the blogs, and not one kind word can be found. Actually, most of Lupe's comments are quite mean and rude.

@Jairo Serrano I'm assuming this isn't your business, and you are merely renting out your main residence after you moved, and making a few dollars today while you do that. Nothing wrong with that. Sometimes BP can be a harsh place to be when you aren't making the profits of the big boys. It's ok. I'll ask this though; if you refinance what are the real numbers? The interest rates have gone up. For example, my duplex interest is 3.75% locked in for 30 years. At today's rates, refinancing to get rid of my PMI (MIP for FHA loan), my monthly payment would actually go up!! Also, do you live close to the house now? I'd get rid of that $75 a month landscaping and either do it yourself or write into your lease that the tenants are responsible for all landscaping/mowing of lawn. And, providing you do not need the cash today, I'd sock away every penny of the gross profit into a reserve account.

LUpe is a troll don't listen or read his or her remarks..  @Mindy Jensen   Mindy will get on it I am sure if she is not in some cool place for the weekend. 

Originally posted by @Mark Fries :
@Jairo Serrano

My thought is that's a horrible deal. I feel bad with people making these kind of monthly profits...listening to too many podcasts about using BRRR method and thinking $200 a month is a win....one thing goes wrong at the property and you are wiped out for years on profit for that unit...

 really the only way to own low end rentals is to pay cash for them ..   but then you will have the refi to you die crowd come on and call you and idiot LOL.... oh well.. I hate debt in all forms there is no good debt to me... other than construction loans 

You need to account for turnover, maintenance, recurring capex and property management if you have a third party manager. But the equity sounds great. Good job!