Real Estate Investment - Correct me if I am Wrong

4 Replies

Hello everyone,

I recently read an article that suggests investing in real estate markets of growing cities such as Houston, Denver, Orlando, etc. These cities boast a low average cost of home ownership that is expected to rise with job and population growth. I was wondering if anyone could offer advice on my plans and perhaps include anything that I may be missing. After a search on Zillow for foreclosed homes in Orlando, I have found that it is possible to purchase a 3bd/2br home in the range of $50-75k. Would it be feasible to put, say, 20% down on a $50k house with the intent of renting the place? Zillow suggests that the mortgage, taxes, and insurance would total to be under $400 a month. Let's assume it costs $100 per month for a property manager. With $500 in costs, not including maintenance fees, would there be any room for a monthly profit? When the renter covers my mortgage and other fees, wouldn't this money essentially go into my bigger pocket (see what I did there) once the house was sold? Hopefully you understand what I am getting at. I would love to hear any suggestions you might have. Perhaps a larger down payment to minimize the mortgage and maximize monthly profits?

Hi Joe! There's nothing wrong with your basic idea, you are simply describing being a buy and hold real estate investor. There's a lot of material here on Biggerpockets to help you get a a better idea of how to research rents, and property values, learn about what your actual expenses of holding a rental would be, pros and cons of various areas, etc. Start with the "learn" tab at the top of the page - also, check out the podcasts, where you will here from all kinds of investors about different approaches to RE investing

@Joe Bol it looks good on paper. That is the first step.  Next you have to find that house in an area that will attract a quality tenant. You also need a property manager that you can trust. You need a reserve account as well. One thing to consider in Florida is insurance costs. Hurricane insurance is not cheap. Keep learning and working through the process and you'll have the answer for yourself.

@Joe Bol "I have found that it is possible to purchase a 3bd/2br home in the range of $50-75k."

You can definitely find many homes in the Central Florida region at or under 50K. Orlando is a growing city and should continue this path barring any major issue in the country. Many homes are available at this price without being a foreclosure or in a short situation. I am a buy and hold investor and my range is typically 40 to 75K. With that said, here in Orlando the majority of houses you will see for 50K you will not want to own due to the neighborhood. (Drugs, crime, etc.)

I can't tell if you are a seasoned investor or just beginning. Based on your analysis your numbers would support a good buy and hold, the amount of down payment is a personal preference at that level. I maintain a 70% loan ratio at the maximum if I choose to even leverage a property. I would recommend searching BP blogs and reading up on some of the low end type rental discussions. Additionally, maybe reaching out to a few locals to get a better feel for the Central Florida area. This is a great place to start and your question is certainly relevant! Good luck to you.

I second @Joe Bol and @Bill S. 's comments. You are considering a buy and hold strategy, which is well-explained in detail in the beginner's guide under the 'Learn' tab. Taking a look at the Rental Properties Calculator under the 'Analyze' tab might give you a good idea of what costs you might want to consider and what your profit will look like too. Welcome to BP.

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