Buy & Hold on 2 Homes

1 Reply

Hi All - I'm looking to purchase 2 homes totaling $600,000.  Together they would generate gross rents of ~$5,300/month. After all was said and done with mortgage, ins, taxes, misc expenses and a mgmt fee we'd cash flow ~1.5k/mo between the two of them. 

I know I'm not even hitting the 1% rule, but the properties are in an area of town that's incredibly predictable and vacancy is not a worry.  Both of these properties have been rented for 10-15 years. I'm curious how people evaluate income taxes on top of the monthly cash flow to determine if something is a deal they'd move forward on or not.  

Looking at the numbers, I feel like this is a good investment. What would people be wary of? What am I missing?

@John Flanders In the early years, you may not have any taxable income due to your depreciation deduction. I would be more concerned initially with your reserve for capital expenditures. You should consider how long it may be before you have to replace any of the major systems of the houses to make sure that your cash flow will have time to build up a reserve for replacing those. You will also want to determine your ROI on the cash flow to see how that compares to other investments.