First investment rental property

2 Replies

I have recently graduated college and thanks to to all of the great people on here I am convinced real estate is the answer to a better life for me, meaning I could live comfortably from rental income when I have around 10 properties. I would like to start out by purchasing a single family home in the 100k-120k price range. As of now I am trying to save around $20k for a down-payment on a house in this price range. I am 25% of the way there and I feel that in a year I will have saved enough to place a down-payment. I have found a 3 bedroom home which is about 8 minutes from Cornell University and close to other schools. The seller is asking for $110k. I dont know the condition of the house but from the pictures it looks like it is in good condition. Three bedrooms homes rent for around $1500 a month in Ithaca, so that is the number I think I will be able to rent it out for. Because of a very large college student population the area has a vacancy rate of close to 0%. Below are some numbers I quickly estimated to see if this is a good investment. I realize that the property is going to be sold by the time I have enough saved to put a down-payment but I am just doing my research for now and trying to become good at analysis.  What do you guys think?. Is this a good investment?. Also is it accurate to assume that as a first time home buyer I will need to put down 20%?. I wish i could provide more information, but this is all I have as of now. Thank you all and I look forward to getting advice on this investment and any type of rental property advice!

Residential Income Property Analysis

Property Assumptions

Purchase Price$110,000

Down Payment$22,000

Loan Term15 Years

Interest Rate4.00%

Principal & Interest Payment$651

Closing Costs$0

Gross Scheduled Income (GSI)$18,000

Vacancy Rate7.00%

Number of Units1

Pro-forma Income Statement & Cash Flow

Gross Scheduled Income (GSI)$18,000

Less Vacancy$1,260

Total Actual Annual Income$16,740

Other Income (Laundry, Late Fees, etc.)$0

Gross Operating Income (GOI)$16,740

Annual Opertating Expenses

Accounting$300

Admin/Bank Charges$0

Advertising$0

Electricity$0

Elevator$0

Gas$0

Landscaping$0

Legal$200

Maintenance & Repair$2,000

Payroll taxes$0

Permits and licenses$0

Pest control$0

Pool$0

Property Insurance$440

Property Management$0

Real Estate Taxes$3,850

Security$0

Telephone$0

undefined$0

Tenant buyout$0

Trash$0

Water$0

Other$0

Other$0

Total Operating Expenses$6,790

Net Operating Income (NOI)$9,950

Annual Debt Service (mortgage payments)$7,811

Before Tax Cash Flows (BTCF)$2,139

Key Operating Ratios

Capitalization Rate9.05%

Cash on Cash (COC)9.72%

Gross Rent Mulitplier (GRM)6.11

Net Income Mulitplier (NIM)11.06

Debt Coverage Ratio (DCR)1.27

Expense Ratio (ER) Per Unit40.56%

Price Per Unit$110,000

Here is a link to the property:

https://ithaca.craigslist.org/reo/4827978957.html

   

Wow your only a town over from me. I didnt expect to see that.

I dont want to sound negative but good luck buying anything in Ithaca for that price range. 

Look for a 3 or 4 unit house as close to downtown Ithaca as possible. Rents are high in downtown and people will rent anything. I specialize in high end apartments but I didnt when I started out. Buy something with the best location possible and rent it out. As your income gets better you can improve the property.

Ive been investing in Ithaca for 10ish years now. I started with nothing. I bought my first house the day before I turned 23 and 10 years later Im making $150,000 year just in rental income. Its possible but it takes dedication and hard work to get started.

I just saw the link you posted. That house is NOT close enough to Cornell to rent out. You will never make it with that house. If you want to be an investor in Ithaca you want properties as close to the Commons as possible. If your house is more than 5 minutes from downtown you can literally cut your rents in half. That is because A. people want to be downtown. B. The bus system outside of town is not as frequent and as you probably know, half of our population are students and another 15% works at either Cornell or IC. They want to take the bus into work or school. If you are not on a bus route and you are that far out your going to find it very difficult to rent.

Example, my first house was a 3 unit off of 79 in the Brooktondale area. It is still technically Ithaca and it is only 6.6 miles to the Commons. You could leave your house and have a drink in your hand at Viva in 10-15 minutes but the house may as well be in Africa. I had such a difficult time renting a 3 bedroom out last year that I had to actually lower the rent for the first time ever.

Location location location. Its never been so true as in our area.

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