First investment property-need opinions!

21 Replies

I am fixing to close on my first rental property. The bank did 75% I put 25%. The bank loan is 14,500 and my cash is around 6500 after closing and insurance. The home as is value is 25,000 with repairs that i listed for the appraiser 29,000 after. Even though In my opinion doesn’t make since. The repair cost is going to be around 5,000. The overall rent will be 750 a month and the same tenant has been there 13 years. I was looking at options to get the money for repairs and options for the tenant in the future rent to own or a lease with the option to purchase. I am in the military as well. Looking for opinions and thoughts for the next step. I have a few plans in mind, but I want to see if anyone has thoughts and options, so that I choose the best routes. Thanks to everyone who responds it means a lot!

@Brandon Birmingham

Look on CL materials section for good deals on materials and be ready to roll up your sleeves for the repairs yourself.

Why are you looking at rent to own options?  If the property cash flows well then why would you want to give it up?

@Brandon Cash flow seems like it could be solid. What kind of neighborhood is this in?

@Jim Goebel It was just an option for the woman who has been there 13 years. Not the best home or one i want in long term it was more of a bounce for the equity to get a more stable rental later! I was thinking a little bit of a longer term flip into a better investment plus she been there 13 years, so i would like to give her an option if she wants it. Bonuses when i'm trying to brand my business and get my landlord name out there in a sense.

@David Pere the cash flow is good. The neigherhood is on the lower quality end, and i believe that was the main reason for the low appraisal because there wasn't a lot of good comparables around it. Although, i'm in the military as well, and i see there is a way for rental investors to get a 0 down. I was also thinking i should have used a first time home buyer because i don't own a home, and since a rental will be my first "owned home" even though i don't live in it i think it will disqualify me which is unfortunate if you could verify that? have you had experience with the va loans and 0 down rental for va?

@Brandon, I have actually written a lot of content, and produced some YouTube videos about the VA loan!

You won't be able to use a first time homebuyer loan unless you intend to occupy it. That is why people house hack with primary residence loans, rather than using the loan for an investment-only property.

@david Pere so should i act quickly before i close to get another rental considering i would lose my first home buyer status???

that might be a rought time frame i have only 10 days before close or would i still be able to keep that status since its a rental?

@David Pere well, i was saving that one for a bigger investment with interest rates. This one was a really small purchase and my friend who is helping me uses them, so it was just a more comfortable transition into real estate!

You can use the VA loan more than once!

You can also use the VA loan for your "first time homebuyer" purchase even if you buy this smaller property.

Food for thought:  the $5000 you are expecting to spend on repairs, are they needed maintenance items or more cosmetic type improvements?  You said the tenant has lived there for 13 years, so my first thought is don’t bother with anything cosmetic until she moves out, THAN go nuts with cleaning up the place.  If it’s necessary items like roofing, safety hazards, etc that’s different.  

I’m not saying this as someone who rents out crummy places and doesn’t care...  I take pride in owning nice, solid, clean rentals.  But my thoughts went that direction when you said how long she’d been there.  Especially if the rent isn’t going to be going up... 

i buy houses in this range . 750 rent on 25k is as fine as frog hairs . You’ll do fine . If you can get 750-800 rents on less than 30k houses you will be getting a handsome return . Don’t listen to naysayers ..Buy up as many as you can get .

@Dennis M yes i agree, i just want to move it to 750. The tenant is only paying 600 right now. I could keep it at 600, but to raise to 750 i fill like ethically i need to make some changes to the house. For future rent and sales also. I'll have about 10,000 in equity. the question is now i have to be creative. Do i take the equity for the repairs, or save up the cash flow from the house to do it piece by piece. Or i could always take a personal loan to cover but that only adds to the bill. 

@ Ravinell Wilson  It would be my suggestion to use money from rent to make necessary repairs.   Split the difference and raise the rent $75.00   If your house sets empty for 3 months to increase your rent by $150 you have gained nothing over the course of the year..    Having a long term tenant who pays  is worth their weight in gold.