Thread: Rental Properties... in your personal portfolio.

Gentleman, great thread. Because of this thread I have been looking at rental properties for future investment. Then last night I was thinking since I'm already purchasing my current home, I'm thinking about flipping it into a rental property.

Let me first give you a little background. I'm in the military so I will move every couple of years, being military I also have, what I believe, is a pretty solid career and fixed income that will only increase over time. I'm purchasing my current house here in El Paso TX and I've lived here about 2 years and will be living in this house for at least another year. My house is a hair under 2K square feet, tiled floors, granite counter tips, stainless steel appliances. The master bathroom has a jacuzzi bath tub, it has arched ceilings and its on a corner lot. there is a park being built across the street and a school 5 blocks down.

Right now I'm on a 30 year fixed rate VA loan at 5%. I pay an escrow because of the VA loan, mortgage, taxes and insurance all in one payment. The payment is right at $1440 per month. When I purchased my house it appraised at $189k my current pay off is about $185k. I'm wondering if I can to turn this property into a rental? I pay the $1440 per month with the knowledge that I'm buying it. I sometimes ask myself if I was renting it, would I pay 1440? I honestly don't know. Reading this thread is sounds like rentals primarily should be used to generate cash flow because housing prices are still falling and paying down the mortgage is a bad investment, its loosing money.

What I've been thinking about doing is refinancing to another conventional 30 fixed and paying points down to 4%. $185k at 4% on a 30 fixed puts the mortgage payment right at 883 per month. If I rent my house at 1250-1350 that would give me about $367-467 per month cash flow. With that money I'll be using it pay for a property management co and also covering maintenance. I'm not sure what I would be paying for property management, but I know it isn't free.

I know I still have to pay my property taxes, my solution for that is to use my federal income tax refund to cover that cost. I know I'm giving the gov't a free loan by receiving a refund.... My insurance on my house isn't very high so I'm not really all that concerned about it. After all this its starting to feel like a wash again..

I'm really motivated to make this work! This is my 2nd house, I sold my first house before the housing market fell and it was basically a wash when it was over. I don't want that to happen again. Any advise is welcome.

Originally Posted by Fuerza

Gentleman, great thread. Because of this thread I have been looking at rental properties for future investment. Then last night I was thinking since I'm already purchasing my current home, I'm thinking about flipping it into a rental property.

Let me first give you a little background. I'm in the military so I will move every couple of years, being military I also have, what I believe, is a pretty solid career and fixed income that will only increase over time. I'm purchasing my current house here in El Paso TX and I've lived here about 2 years and will be living in this house for at least another year. My house is a hair under 2K square feet, tiled floors, granite counter tips, stainless steel appliances. The master bathroom has a jacuzzi bath tub, it has arched ceilings and its on a corner lot. there is a park being built across the street and a school 5 blocks down.

Right now I'm on a 30 year fixed rate VA loan at 5%. I pay an escrow because of the VA loan, mortgage, taxes and insurance all in one payment. The payment is right at $1440 per month. When I purchased my house it appraised at $189k my current pay off is about $185k. I'm wondering if I can to turn this property into a rental? I pay the $1440 per month with the knowledge that I'm buying it. I sometimes ask myself if I was renting it, would I pay 1440? I honestly don't know. Reading this thread is sounds like rentals primarily should be used to generate cash flow because housing prices are still falling and paying down the mortgage is a bad investment, its loosing money.

What I've been thinking about doing is refinancing to another conventional 30 fixed and paying points down to 4%. $185k at 4% on a 30 fixed puts the mortgage payment right at 883 per month. If I rent my house at 1250-1350 that would give me about $367-467 per month cash flow. With that money I'll be using it pay for a property management co and also covering maintenance. I'm not sure what I would be paying for property management, but I know it isn't free.

I know I still have to pay my property taxes, my solution for that is to use my federal income tax refund to cover that cost. I know I'm giving the gov't a free loan by receiving a refund.... My insurance on my house isn't very high so I'm not really all that concerned about it. After all this its starting to feel like a wash again..

I'm really motivated to make this work! This is my 2nd house, I sold my first house before the housing market fell and it was basically a wash when it was over. I don't want that to happen again. Any advise is welcome.

Nobody??

Originally Posted by Fuerza

Gentleman, great thread. Because of this thread I have been looking at rental properties for future investment. Then last night I was thinking since I'm already purchasing my current home, I'm thinking about flipping it into a rental property.

Let me first give you a little background. I'm in the military so I will move every couple of years, being military I also have, what I believe, is a pretty solid career and fixed income that will only increase over time. I'm purchasing my current house here in El Paso TX and I've lived here about 2 years and will be living in this house for at least another year. My house is a hair under 2K square feet, tiled floors, granite counter tips, stainless steel appliances. The master bathroom has a jacuzzi bath tub, it has arched ceilings and its on a corner lot. there is a park being built across the street and a school 5 blocks down.

Right now I'm on a 30 year fixed rate VA loan at 5%. I pay an escrow because of the VA loan, mortgage, taxes and insurance all in one payment. The payment is right at $1440 per month. When I purchased my house it appraised at $189k my current pay off is about $185k. I'm wondering if I can to turn this property into a rental? I pay the $1440 per month with the knowledge that I'm buying it. I sometimes ask myself if I was renting it, would I pay 1440? I honestly don't know. Reading this thread is sounds like rentals primarily should be used to generate cash flow because housing prices are still falling and paying down the mortgage is a bad investment, its loosing money.

What I've been thinking about doing is refinancing to another conventional 30 fixed and paying points down to 4%. $185k at 4% on a 30 fixed puts the mortgage payment right at 883 per month. If I rent my house at 1250-1350 that would give me about $367-467 per month cash flow. With that money I'll be using it pay for a property management co and also covering maintenance. I'm not sure what I would be paying for property management, but I know it isn't free.

I know I still have to pay my property taxes, my solution for that is to use my federal income tax refund to cover that cost. I know I'm giving the gov't a free loan by receiving a refund.... My insurance on my house isn't very high so I'm not really all that concerned about it. After all this its starting to feel like a wash again..

I'm really motivated to make this work! This is my 2nd house, I sold my first house before the housing market fell and it was basically a wash when it was over. I don't want that to happen again. Any advise is welcome.

You need to find rental comps to dictate what it will actually rent for. What you "think" has no bearing on what the market will pay. Craigslist, padmapper.com, finestexpert.com, and talking to local RE agents/Prop Mgmt firms should give you an idea of what it will rent for.

If it does end up around $1440, you are going to be running at a negative cash flow so expect to have some reserves.

Personally, I'd try to get out from it, the ROI of a negative cash flowing rental that is paid off in 30years is fairly poor especially when you consider the hassle of dealing with tenants and toilets.

Spencer, thanks for the advise. I will look into what property management thinks it could rent for.

Are you renting out to students of UofT?
I'm currently looking into purchasing a house or a few houses up in York village. They each cost close to 500k and have 5 to 6 bedrooms that pull in 900 to 1k each month.

I recently looked into buying a few REO properties in Detroit, yeah I know i'm crazy, but in the midtown area, which are attracting a lot of buyers from NYC, who will be willing to rent a place that was bought for $30k for $700 or $800 a month. By the end of 2012 I wish I can purchase at least 5 homes.

Originally Posted by Paul734

I recently looked into buying a few REO properties in Detroit, yeah I know i'm crazy, but in the midtown area, which are attracting a lot of buyers from NYC, who will be willing to rent a place that was bought for $30k for $700 or $800 a month. By the end of 2012 I wish I can purchase at least 5 homes.

Why is the midtown area attracting buyers from NYC?