All Forum Posts by: Gregory J.

26 months with just normal mortgage payments or I could pay down the principal by $12k and get it removed.

I signed a tenant to a lease yesterday for my first long term rental property! hard to say which part of this was the closing of the deal, but to me signing of the lease was the milestone. We purchased a new home to be closer to my wife's job. We were on the fence about renting versus selling, but ultimately decided to rent thanks to the motivation I got from reading biggerpockets. Other than my earlier post asking about this tenant this is my first REI activity! Thank you to everyone who posted helpful comments on my original post asking about how to screen the tenant (link below)

https://www.biggerpockets.com/forums/52-rental-pro...

Here's the detail of the deal. I know it doesn't look like a blockbuster, but compared to the high costs of selling I am looking forward to long term equity.

I already own the home so no closing costs. 

home value: 265,000

principal balance: $216,000

interest rate: 3.25%

Rent: $2100/month

mortgage payment: $1934 includes:

Principal: 476.20

Interest: 589.42

PMI: 217.90

insurance: 101.00

local taxes: 549.24

so currently cash flow is $166.24 per month with a profit of $642.44 not including other expenses

I am budgeting for expenses at 15% of rent or $315 per month. that makes my cash flow -$148.76!

Long term though this works for me because PMI isn't forever. After PMI I'll have a cash flow of $384.14 not including expenses and a net profit after expenses of $545.34 per month. I analyzed three options for what to do with the PMI and I think I'll pay down another $12,000 on the mortgage to get rid of the PMI. I also considered refinancing to a conventional mortgage with a higher rate and no PMI or leaving the PMI in place for another 26 months until it drops off on its own. I would be happy to share the analysis if anyone wants to look at it. Basically I built cash flows for five years based on amortization tables and assumed I would sell the house in five years (I won't really). then I compared the NPV of the cash flows using my highest interest rate student loan as the discount rate.

I'm also optimistic I'll do better than $315 per month on expenses because we signed a 3 year lease and part of that expense is to allow for vacancy.

I have enjoyed finding this website and now have big dreams for future investments. It is giving me the motivation to get my personal house in order so I can start saving to invest more.

Of course the first prospective tenant I ever met in my not yet begun REI career meets none of the established guidelines!

prospective tenant is a foreign exchange officer from a country allied with the US. I verified this is a real program where allied countries exchange military officers. We are also very close to a large military base so more than 50% of the homes in the neighborhood are military. other details about them and questions I have are: 

1. income is close to 5x rent

2. how effective of a background check and credit check can I do on a foreign national who has no SS#? would a copy of military orders be a sufficient replacement for a background check if I can't figure out how to do one?

3. They have never rented, they have always owned a home. They are only renting because it is a temporary (3 year) assignment. They said they can provide a letter from their home loan lender showing exemplary payment history.

4. They were friendly, professional, on time in person.

So assuming they can prove everything they said. would you rent to them?