First rental property purchase, is it a good deal?

Question

Hey everyone!

I’m looking to purchase my first investment property and I’m looking at taking out $30,000 in equity in my current home to use as a down payment for a rental investment.

I found a property close by that I’m confident it taking care of. I just want to see if people here think my numbers can work.

Two separate houses on one lot. 800 SQFT and 500 SQFT. With a two car detached garage.

It’s a 5 minute walk to the beach and brand new everything, property is in perfect condition.

Asking: $114,000

Taxes:$2,350

Rent:$600

Rent:$800

Tenants pay utilities.

Mortgage would be around $600 with taxes and insurance and 25% down.

That would leave me with a cushion of around $800 pay for vacancies repairs or other costs. So I’m hoping four around $250 a door or so.

This sounds good to me personally, am I missing something here? Anyone have any thoughts on these numbers?

Thanks for all your help!

Account Closed · Answer

That's in Buffalo?  Are you sure the taxes are correct?  I'm not an expert on Buffalo, but the last time I checked, NY taxes were way higher than that.

Does it need any maintenance?  Have you figured that in?

I do think it's really smart to buy nearby and manage yourself.

Check out these calculators, to see if your numbers work here, too.  I've found them to be really helpful:

Rental income calculator:

https://www.calculator.net/rental-property-calculator.html

Use these to fill in some of the blanks in the above calculator:

Tax calculator

https://smartasset.com/taxes/property-taxes

Residential Rent Vacancy Rates:

https://www.deptofnumbers.com/rent/

Adam Costanzo · Answer

Building off of what Brandon suggested, you could rent the larger unit for $800/month so you have that consistent revenue to cover your expenses. With the smaller unit, try Airbnb or shorter-term rentals to maximize returns. I get that may not be ideal right now given COVID but food for thought once things return to normal.

Khaled Morad · Answer

Account ClosedThose taxes sound right to me. NY has high taxes. However, the city of Buffalo has very low taxes compared to the rest of NY.

@Aaron Rizzo 5 min walk to the beach... hmm. South Buffalo, I'm guessing?

Khaled Morad · Answer

I agree^

Matthew Irish-Jones · Answer

@Aaron Rizzo $250 per door is solid cash flow.  Without knowing any other details it looks like a buy.

Khaled Morad · Answer

@Aaron Rizzo Found the property in question :)  Sorry, couldn't help it. Those are screaming to be short-term beach rentals! However, I don't know how popular any beaches down there are. I work primarily within the City of Buffalo. You probably know the area better. If you don't I would call local Airbnb property managers and ask them about the popularity and their numbers.

Aaron Rizzo · Answer

@Sue K. NY taxes are horrendous, but this property is in a less populated zip code about 30 mins from downtown. Thanks for your thoughts!

Brandon Kmiotek · Answer

Hey Aaron,

Definitely use the calculators!!!

Also what area is this in if you don't mind me asking? With a 5 minute walk to the beach have you thought about renting the houses weekly in the summer? You could get $600 weekly instead of monthly. I know this Covid will affect the rentals this summer but perhaps in the future that could be a potential option.

Also is flood insurance required since it's so close to the water?

Account Closed · Answer

@Aaron Rizzo

Sounds like a 10-15%(ish) cash-on-cash return (if it's "rent ready" now). If that % (and the cashflow) meets your criteria, then you have your answer.

if it were me, I'd probably try and make the deal work with less money out of pocket.

Aaron Rizzo · Answer

@Matthew Irish-Jones

My plan would be just a rental as I’m not too confident in the idea of using it as an Air BNB but admittedly I know very little about that part of RE.

I would prefer to start as a rental and possibly switch to an Air BNB once I get more properties or understand that world better.

First rental property purchase, is it a good deal?

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