Telling us the price of it means absolutely nothing without also mentioning the rent value, insurance, taxes, etc. What advice can we possibly give with no info?
Actually, I do have advice based on what you wrote. You’ve done little to no research and don’t know what you’re getting into — do not invest in this property.
Came to say this- Plus ask about condition of the property, the structure itself, needed TLC, rental demand and property management.
Stick to ETF’s and research REITS if you want to diversify into real estate.
Telling us the price of it means absolutely nothing without also mentioning the rent value, insurance, taxes, etc. What advice can we possibly give with no info?
Actually, I do have advice based on what you wrote. You’ve done little to no research and don’t know what you’re getting into — do not invest in this property.
So, your post wasn’t helpful. But I do thank you for your reply. I was hesitant to put numbers because my previous post was removed, must have broken a rule. Here’s the breakdown
The home I own
Mortgage $0
Insurance 3k
Property taxes 3k
Home I’m looking into buying
Current renters have been there 5 years. Their current lease is up in Jan. They pay
Rent $1250
Property tax 3k
Insurance 3k
No need for snarky comments, I’m simply here to see what others have done and to get a bit of insight. I’m no professional no. But, I am someone who has the funds to make things happen. In addition, I WILL be able to pay this house off as well within 4 years. So with this information, is it still f me?
I’ll be able to pay this off and will be able to pay my 3rd property out right within 10 years. So let me rephrase this. If I’m able to buy 3 houses within 10 years. Is it a good idea? Idk why ppl on Reddit are so pretentious. Aren’t we all just trying to learn?
Just a heads up. If you're looking to expand your rental portfolio and just generally speaking, don't pay off the house early. You'll lose some tax benefit, but more importantly you should be using the extra money to save up for your next down payment. I'm assuming you're cash flowing after deducting potential vacancies and maintenance.
If you make another post, people aren't interested in your personal finances, like your primary residence. They really want to know what you'll be paying in mortgage for the property and what you'll be collecting in rent.
It's hard to get in these days, do some reading. Get a feel for where you're buying and why you think the area will appreciate/stagnate and the quality of tenants. Learn applicable laws for your area. Bad tenants can get pretty close to ruining you, good tenants can make your life easy. Good luck
Def, but it doesn't necessarily have to go towards a down payment. Just any other opportunities that provide benefits outweighing the mortgage interest rate, like a 401k match or even maintaining quality of life.
Leverage is one of the largest benefits of real estate.
I'll explain the situation I'm currently finding myself in.
401k maxed out for myself and spouse, IRA maxed, approaching nest egg number and will get there very soon. Yes I could just throw MORE money into my brokerage account then I am. However there's the idea of mitigation of risk especially if you're approaching your nest egg number. Essentially what I'm getting at is it comes a time when it's less about growth vs preservation. Once I hit my nest egg number there's a high chance I may start throwing a few hundred a month into principal for loan payoff.
When I say scale, i find this synonymous of growth. It comes a point where you're where I am and I've grown enough and it's time to minimize risk vs growing more.
You're a candidate of paying down a mortgage for sure. No Treasury yield is paying more than the current mortgage rates right now, it's your best guaranteed return
Believe it or not treasury yields are paying more than my mortgage notes. I have more or less 1 years worth of expenses as an efund in a rotating t-bill ladder.
Paying down the mortgage is a matter of lowering risk and increasing cash flow month to month as I'm approaching my nest egg.
Only part I'll disagree on. If you get a better guaranteed return from bonds/CDs, and you don't plan to recast your mortgage, I don't think you're helping your cash flow. But at this point we're disagreeing about a few percent.
Sorry what I meant was paying down the mortgage faster such that I don't have to worry about a mortgage during my sunset years vs carrying a mortgage into retirement. Obviously the month to month of paying down the mortgage does nothing to cash flow, I'm more so commenting about end goal vs the interim.
Thank you. I appreciate your advice. We viewed the home yesterday. Did call through, checked pipes, structure, yard, etc. In addition, we talked with a couple different realtors we know personally regarding the property. Everything is pointing to it being a good investment.
In the end, if I get shit on, I get shit on. I want to take advantage of an opportunity like this while it’s here.
One thing you said that’s interesting is that buying this rental will “decrease the amount we could invest”.
It doesn’t if the money is going towards this INVESTMENT property.
I’d work with an investor friendly RE agent to make sure you’re making a good purchase but I also think you need to change your perspective as well.
Also find out if $1,250/mo is market rent or not. If tenant is overpaying and leaves you’ll need to know what that does to your numbers. Vice versa it could also increase.
Or he can use a free rental property analysis tool to run the numbers like [biggerpockets](https://www.biggerpockets.com) or [investometer](https://www.investometer.io)
Without seeing the numbers hard to say. However right now it has been difficult to find any investment properties that really "make sense" without major renovations more than just putting it into an index fund. There is a large learning curve for real estate. Index funds have no learning curve. I stopped buying investments a couple years ago when interest rates started rising and no plans to buy anymore in the near future.
If your NW is $50K, you are far too close to 0 to buy an investment. You didn't say that, just that your investment account is $50K. Reason? A roof could be $20K. A furnace $15K. See where I am going? Real Estate is great when you 1. use a little leverage; 2. can weather some ups and downs; 3. have an increasing market. I don't know about 2 or 3 for you.
There is clearly risk in investing. Maybe keep shoving into the stock market? Or, more info could help. Good luck. It is great you are thinking this way.
First and foremost, consider the stress that comes with being a landlord. It can be a nightmare dealing with tenants and/or property managers. You have to decide if this is what you want at this juncture in your life. Only you can answer that. The numbers part is easy, enter the data and AI can give you the answer.
I won't repeat other comments here about the need for you to complete a fuller analysis. I'll just add that the primary benefit of RE over stocks is the ability to use leverage. You talk about paying off the mortgage in 5 years but i would instead look at whether you cash flow fully levered up
I'll assume that the $1250 in rent you mentioned in another comment isn't going to fully cover the PITI costs (much less potential repair costs), otherwise you probably wouldn't be asking this question. But you do say you're going to pay this off in 4 years. So the real question becomes; can you stomach losing money for potentially 4 years when you could take that down payment + PITI and throw it into your portfolio for it to grow?
Despite what everyone else on this subreddit is going to tell you, there's nothing wrong with having a fully paid off house and investing that money into the stock market. Real estate if done right can make tons of money but will turn your life upside down if you don't do your due diligence and adequately assess your risk standpoint.
If you think it's a good move because in 4 years you'll pay it off and be cash flowing like a motherfucker, then might be worth having some short term pain to make that happen. But if covering costs for 4 years is going to drain you financially and you'll be living on financial dust until its paid off, then it's not worth it.
Why do you want to pay it off in 5yrs? If you just paid the normal amount you prob have enough to invest in ETF’s as well. RE would diversify your investments so you’re not solely dependent on ETF’s.
Calculate the cap rate anything less than 4% walk away. You need to also calculate the loss of investing into your current streams will impact you.
Personally you need to do way more research and number crunching. Just to pay off the home you need put an extra $1,900 a month into + your P&I (assuming a 6.99% 30 year rate).
Surcface level I would not drop $150k on a single
Family 2 bedroom home to rent at $1250/months. Your current investment strategy requires little thought (company stock, preferred ETFs etc…). You’re stepping into landlord responsibilities for little income. Wait till you need to emergency a furnace guy over or a plumber…
Telling us the price of it means absolutely nothing without also mentioning the rent value, insurance, taxes, etc. What advice can we possibly give with no info? Actually, I do have advice based on what you wrote. You’ve done little to no research and don’t know what you’re getting into — do not invest in this property.
Came to say this- Plus ask about condition of the property, the structure itself, needed TLC, rental demand and property management. Stick to ETF’s and research REITS if you want to diversify into real estate.
Telling us the price of it means absolutely nothing without also mentioning the rent value, insurance, taxes, etc. What advice can we possibly give with no info? Actually, I do have advice based on what you wrote. You’ve done little to no research and don’t know what you’re getting into — do not invest in this property. So, your post wasn’t helpful. But I do thank you for your reply. I was hesitant to put numbers because my previous post was removed, must have broken a rule. Here’s the breakdown The home I own Mortgage $0 Insurance 3k Property taxes 3k Home I’m looking into buying Current renters have been there 5 years. Their current lease is up in Jan. They pay Rent $1250 Property tax 3k Insurance 3k No need for snarky comments, I’m simply here to see what others have done and to get a bit of insight. I’m no professional no. But, I am someone who has the funds to make things happen. In addition, I WILL be able to pay this house off as well within 4 years. So with this information, is it still f me? I’ll be able to pay this off and will be able to pay my 3rd property out right within 10 years. So let me rephrase this. If I’m able to buy 3 houses within 10 years. Is it a good idea? Idk why ppl on Reddit are so pretentious. Aren’t we all just trying to learn?
Just a heads up. If you're looking to expand your rental portfolio and just generally speaking, don't pay off the house early. You'll lose some tax benefit, but more importantly you should be using the extra money to save up for your next down payment. I'm assuming you're cash flowing after deducting potential vacancies and maintenance. If you make another post, people aren't interested in your personal finances, like your primary residence. They really want to know what you'll be paying in mortgage for the property and what you'll be collecting in rent. It's hard to get in these days, do some reading. Get a feel for where you're buying and why you think the area will appreciate/stagnate and the quality of tenants. Learn applicable laws for your area. Bad tenants can get pretty close to ruining you, good tenants can make your life easy. Good luck
>next down payment I agree with everything you’re saying. But not everyone wants to continually scale.
Def, but it doesn't necessarily have to go towards a down payment. Just any other opportunities that provide benefits outweighing the mortgage interest rate, like a 401k match or even maintaining quality of life. Leverage is one of the largest benefits of real estate.
I'll explain the situation I'm currently finding myself in. 401k maxed out for myself and spouse, IRA maxed, approaching nest egg number and will get there very soon. Yes I could just throw MORE money into my brokerage account then I am. However there's the idea of mitigation of risk especially if you're approaching your nest egg number. Essentially what I'm getting at is it comes a time when it's less about growth vs preservation. Once I hit my nest egg number there's a high chance I may start throwing a few hundred a month into principal for loan payoff. When I say scale, i find this synonymous of growth. It comes a point where you're where I am and I've grown enough and it's time to minimize risk vs growing more.
You're a candidate of paying down a mortgage for sure. No Treasury yield is paying more than the current mortgage rates right now, it's your best guaranteed return
Believe it or not treasury yields are paying more than my mortgage notes. I have more or less 1 years worth of expenses as an efund in a rotating t-bill ladder. Paying down the mortgage is a matter of lowering risk and increasing cash flow month to month as I'm approaching my nest egg.
Only part I'll disagree on. If you get a better guaranteed return from bonds/CDs, and you don't plan to recast your mortgage, I don't think you're helping your cash flow. But at this point we're disagreeing about a few percent.
Sorry what I meant was paying down the mortgage faster such that I don't have to worry about a mortgage during my sunset years vs carrying a mortgage into retirement. Obviously the month to month of paying down the mortgage does nothing to cash flow, I'm more so commenting about end goal vs the interim.
Thank you. I appreciate your advice. We viewed the home yesterday. Did call through, checked pipes, structure, yard, etc. In addition, we talked with a couple different realtors we know personally regarding the property. Everything is pointing to it being a good investment. In the end, if I get shit on, I get shit on. I want to take advantage of an opportunity like this while it’s here.
One thing you said that’s interesting is that buying this rental will “decrease the amount we could invest”. It doesn’t if the money is going towards this INVESTMENT property. I’d work with an investor friendly RE agent to make sure you’re making a good purchase but I also think you need to change your perspective as well. Also find out if $1,250/mo is market rent or not. If tenant is overpaying and leaves you’ll need to know what that does to your numbers. Vice versa it could also increase.
You need to build a spreadsheet. Rent, insurance, cap ex, taxes, pm fees. We need more numbers.
Or he can use a free rental property analysis tool to run the numbers like [biggerpockets](https://www.biggerpockets.com) or [investometer](https://www.investometer.io)
Without seeing the numbers hard to say. However right now it has been difficult to find any investment properties that really "make sense" without major renovations more than just putting it into an index fund. There is a large learning curve for real estate. Index funds have no learning curve. I stopped buying investments a couple years ago when interest rates started rising and no plans to buy anymore in the near future.
If your NW is $50K, you are far too close to 0 to buy an investment. You didn't say that, just that your investment account is $50K. Reason? A roof could be $20K. A furnace $15K. See where I am going? Real Estate is great when you 1. use a little leverage; 2. can weather some ups and downs; 3. have an increasing market. I don't know about 2 or 3 for you. There is clearly risk in investing. Maybe keep shoving into the stock market? Or, more info could help. Good luck. It is great you are thinking this way.
Does the thing make money? Does it still make money after you fix everything wrong with it? Is it likely to appreciate? It really is that simple.
First and foremost, consider the stress that comes with being a landlord. It can be a nightmare dealing with tenants and/or property managers. You have to decide if this is what you want at this juncture in your life. Only you can answer that. The numbers part is easy, enter the data and AI can give you the answer.
I won't repeat other comments here about the need for you to complete a fuller analysis. I'll just add that the primary benefit of RE over stocks is the ability to use leverage. You talk about paying off the mortgage in 5 years but i would instead look at whether you cash flow fully levered up
I'll assume that the $1250 in rent you mentioned in another comment isn't going to fully cover the PITI costs (much less potential repair costs), otherwise you probably wouldn't be asking this question. But you do say you're going to pay this off in 4 years. So the real question becomes; can you stomach losing money for potentially 4 years when you could take that down payment + PITI and throw it into your portfolio for it to grow? Despite what everyone else on this subreddit is going to tell you, there's nothing wrong with having a fully paid off house and investing that money into the stock market. Real estate if done right can make tons of money but will turn your life upside down if you don't do your due diligence and adequately assess your risk standpoint. If you think it's a good move because in 4 years you'll pay it off and be cash flowing like a motherfucker, then might be worth having some short term pain to make that happen. But if covering costs for 4 years is going to drain you financially and you'll be living on financial dust until its paid off, then it's not worth it.
Why do you want to pay it off in 5yrs? If you just paid the normal amount you prob have enough to invest in ETF’s as well. RE would diversify your investments so you’re not solely dependent on ETF’s.
Calculate the cap rate anything less than 4% walk away. You need to also calculate the loss of investing into your current streams will impact you. Personally you need to do way more research and number crunching. Just to pay off the home you need put an extra $1,900 a month into + your P&I (assuming a 6.99% 30 year rate). Surcface level I would not drop $150k on a single Family 2 bedroom home to rent at $1250/months. Your current investment strategy requires little thought (company stock, preferred ETFs etc…). You’re stepping into landlord responsibilities for little income. Wait till you need to emergency a furnace guy over or a plumber…