New to investing, looking for input on house purchase
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Hey there! I’m new to investing in Durham and I am thinking of buying a neighbors 3 bedroom house near Duke. It’s not going to be a steal because it’s close to Duke, but I think it might be easier to rent and or sell in the future. Wondering if you experienced folks could offer some advice to a newbie to purchasing an investment.
1. The location is good-near Duke-but it’s not a cheap house-roughly 330k or so less any repairs. The owner is my neighbor and has offered to let me make first offer. His realtor is bringing in an appraiser to give me a fair starting value and they said I could deduct from there for repairs because they are selling as is. Prior to COVID folks were often asking for homes to purchase in the area and even rent because of the housing shortage. Not sure how things ae now with COVID. I do know I get calls all the time asking if I’m selling my house and I reside right next door,but I’m assuming those are wholesalers . I won’t get a steal on the house but trying to figure out if its a good investment. How do you go about determining whether a property is a good investment? Do you have an expense vs profit calculator that helps guide you as to whether it’s a good investment?
2. Approx value of the house is 330k -it will probably be less as the owner is not doing any repairs or work and they said I could deduct. I don’t foresee major repairs but not sure yet. According to Wells Fargo I would have to put 66k down, closing cost around $8475 at apr of 2.729% and the monthly mortgage payment would be around $1427 per month. I’m not sure if that rate would be higher for a rental property, since I already have a residence,do you know?. The potential rent in the area for a 3 bedroom looks like about $1900 a month. That would leave me with about $473 per month for all other expenses. The taxes on the property are around $3300 per year, so after taxes I’m left with about $2376 for the year for all repairs and all other expense. What typical landlord expenses would I have to consider and where would I find the typical costs? What do you typically have the tenant pay vs landlord and how much do you set aside for property maintenance and emergency expenses. What is the minimum income your willing to accept when trying to determine whether to purchase?
3. Do you typically get a loan or buy cash? I told my neighbor I would pay cash but thats before I realized how expensive it was. I thought of buying with cash to get a better deal and getting refinance later, but not sure if the rates would be higher that way. I also don’t know how long you have to wait before you could refinance, after buying the house. Anyone know? I just thought perhaps I might get a lower price if I pay cash but not sure.
4. I have a disability and am not working but my spouse works. I live off my existing investments so I’m really looking for something that will provide me income or go up in value over time. I would like to be able to make some income monthly after expenses but Im not sure if it’s doable with this house. I really need to get a handle on what expenses will look like. What do you usually look for in a property? Do you typically want the rent to pay off all expenses yearly and come out with some income or do you hope to come out even? Do you avoid larger homes and purchase smaller less expensive properties? Just looking for some input as purchasing investment properties is new to me. Any and all advice is welcome.
5. In regards to paying cash or loan. If I pay cash then all the income is mine-less expenses-however then my 300k+ is tied up. I might also be able to get the house slightly cheaper also if cash. I would be getting roughly $1900 a month income though-less any expenses. This would probably work out to 4-5% yearly income after expenses..I think... If I use a mortgage my funds are not tied up but I probably won’t make much income monthly either. Which way would you all go-cash, mortgage, or cash and then refinance later? Most have said mortgage but just curious. I suppose if I get a mortgage then I would have more cash to put into other investments so that is probably a better move.
6. I noticed that the property is listed as a 2 bedroom on the property taxes but it’s a 3 bedroom and always has been. It was built as 3 bedroom. Some others with houses built by same builder have the same issue.Does that impact anything?