All Forum Posts by: Edward Burns

As a rental, you will have operating costs on the order of $550 to $600/month. That includes taxes and insurance you listed above, vacancy (1000/yr), Property management ($1000/yr), maintenance and repairs ($1000/yr, but should be slightly cheaper the first year or two), capital expenses ($500/yr this is a fund to replace major items (HVAC, roofs, HW heaters etc). With a rent of $950/month, you will get about $400/month (assuming no mortgage), or $4800/yr. Giving you a return on investment of about 6% (better than a savings account currently) but many on this site are looking for closer to 10%

Good luck, I hope the property is what you want. Please keep in mind by time you add up all the operating expenses (not including mortgage payment) you are probably looking at almost $1000/month.

No in my opinion increasing the down payment will not significantly help. If the rental value is on the order of $1600/month, I would not be buying the house at any higher than $160,000. The killer on the deal to me is the $4000/yr in taxes. Check to see what the actual taxes ($4K seems like an estimate) are by going to the county assessors web site (most counties have the information available online). In addition how old is the Hot water heater, how old is the HVAC system, How old is the roof? If you have to replace major units soon, it affects the value of the deal.

In addition, you need to have 3-6 months cash reserves to cover both this mortgage and your primary mortgage.

@Simon Campbell

You are correct if you go by the 50% rule, but in this case his expenses will probably exceed the 50% rule. Just taking the property tax ($333/month), vacancy ($160/month), Property management ($160/month) equals over $650/month with nothing for repairs or capital expenditures or insurance. So $800 per month in costs (not including mortgage) will not work in my opinion.

Buying it for yourself to use a rental property is an option, but whether it can be profitable to do so depends on what the can be rented for. There are numerous dialogues on BP on the costs associated with rental properties and how to evaluate potential deals.

With rehabbing in winter, particularly in the winter, you have to be intensive in your planning while at the same time more flexible. You need the material on hand (or know they can be gotten quickly) because Upper Midwest winter weather can have short stretches of moderate temperature (yes even 70 degrees in January) where exterior work can easily can be done.

You may want to review http://www.biggerpockets.com/forums/67/topics/105123-to-my-rehabbers-with-cold-winter-climates

which covers this topic.

First glance with the limited information you provided. It would probably not be a good investment property if the rent is $1500/month. But could be workable if rent was $1900/month. Also, unless you have other funds I would look towards putting down 20-25% of the purchase price not the 40% or so you plan, and hold the rest of the money as a reserve fund to cover unanticipated expenses.

Social Services or Social Security. There is a big difference.

Social Services to me means section 8 housing vouchers, food stamp existant, and other welfare benefits.

Social Security (whether you agree with the program or not) is based on repayment of money you earned while working and supposedly placed into a trust for retirement. Between you and your employer you pay, I believe 13% of salary into this fund while working. And if Social Security was a) not borrowed against by the government and b) payments not expanded to included other items would be self substaining. A person can be indigent and forced to live Social Security check to Social Security check thru no fault of their own. Until just a few years ago you could retire early and suddenly develop health problems depleting your savings. Cobra improved that but still left a 6 months gap in coverage until Medicare kick in. New laws have changed that by extending Cobra from 18 months to 24 months.

For an explanation on what an escrow is and how it works see: http://www.realestateabc.com/homeguide/Escrow.htm

As far as the lender goes, first it would be rare in today's market place to get any bank to finance a deal 100%.

In addition, while the bank might have willing (and maybe would still be willing) to lend you $50K on a house, the profit they can make on a $28K make not be sufficient to cover their cost and provide them a profit, so they are refusing loan it.

The first step has to be eliminating the source of the odor. Eliminating cat urine odor while leaving carpet or subflooring that have been saturated with urine but sequentially dried will result in the odor returning if and when the surface gets exposed to humidity or moisture. Likewise, eliminating cigarette smoke odor without stopping the smoking is a losing battle.