Buying to rent out now and live in for retirement later

[John Mano]

Hello All,

I'm an investor from out of state and I'm looking into purchasing a property in Vegas to rent out to my cousin who lives there now and then maybe in 5 - 10 yrs use it as a vacation/retirement home for myself.  Currently I'm looking in the Spring Valley and Summerlin area for 3BR/2BA homes and I see there are a few condos in the $160k-170k range.  My goal is to at least break even and maybe even positive cashflow.  Is that realistic given the current rent in those areas?  I have visited Vegas many times, is it fair to say near Summerlin is 'B' neighborhood and southeast Spring Valley is 'B/C' ?  Are there other comparable areas that I should look at?  Thanks.

- John

[Bill B.]

If it’s an eventual retirement home “profit” becomes less important that locking in today’s prices and interest rates. I think 90% of us think properties will be more expensive and rates will be higher in 10 years. 

Depending on if you itemize your taxes or not and if you can afford to be cashflow negative you may want to try for a shorter loan. 

Because I don’t itemize my personal taxes I used a 15 year loan on my eventual retirement townhome on Lake Minnetonka. Let me share how “unideal” it is on paper as a rental. 

I bought it 5 years ago for $460k with a 15 year mortgage and a $440/mo Hoa. My PITI is $3050 plus $440 Hoa for a total of $3500/mo. I get $2700/mo in rent for the last 5 years (7 year lease). So it's cashflow negative $800/mo but it's paying down the $1700/mo. So My "profit" is $900/mo or $11,000/year. Tax free because of the $16k year depreciation. It's also appreciated $150k during that time.

The point is I could afford the $800/mo negative cashflow, I wanted to lock in the low price and low interest (3%) and I want to pay it off before we live there, while the interest is tax deductible. Plus any upgrades you might want to make you can install while it’s still a rental. 

It’s one of the few real estate “investments” you can allow your emotions to play a roll. 

Feel free to reach out if you come to visit sometime, I love to talk real estate. 

Ps.  I Reread your post and love my Hoa for the 6 months per year I don’t plan to live there when retired. (Snow/lawn care, boat lifts in and out and so on...) but if your plan is to live there full time when you retire try adding the Hoa fee to your mortgage payment and see if you can afford a more expensive house with no Hoa or at least a lower one.