Just my area, but I've done some math. I buy the property at $300 a month, taxes and insurance are roughly $200 a month. I'm on the hook for all repairs. If I could get $800-900 a month, its a go. Most places here are renting in the $600 range. That doesn't leave much profit until the property is paid off. Sorry for the hijack Scott
That's true. I made sure to buy my house in a nice neighborhood. better to pay a little more for the house to get a steady stream of income with good tenants vs empty/bad tenants. I get 2350 per month. But maintenance fees are 365+30 association fees +10% property manager +4% GET. getting new tenants which hopefully means overlap, but also means property manager gets 20% this month. Needless to say I'm not making any money.
You don't need to cash flow $3-400 a month to cover repairs unless you aren't doing them yourself. You also are overlooking all the principle being paid down for you as profit. But I agree, stable rental houses don't really stuff your pockets with cash until you are 10-15 years into it.
I agree the potential is there, and once paid down, its a great investment. I just don't think I'd want to stick my neck out for $100 a month profit. Our property taxes are stupid high, coupled with a low income area, and it makes rentals a little dicey locally. I'd love to have 20 propertys paying for themselves. I'm still looking for the right place. The one's I've looked at are too close to a break even proposition for me to be comfortable.
What kind of houses are these that are selling for $65k-$90k? In Northern IL and back in Upstate, NY it's pretty tough to get much of anything in that price range. It would be very difficult to find even a 2 bedroom 800 sq/ft townhome that wasn't trashed for that much $$$. Curious if that's the type of properties these are or maybe housing prices by you are just significantly lower?
You have to play with your income taxes, the taxes, interest and maintenance you can write off on your personal income tax which will put you in a lower tax bracket. My accountant also depreciates the house on my taxes which I see the money now but will be a capital gain later. So that hundred a month could save you a couple thousand in income tax.
3-4 bedroom 1-2.5 bath brick ranch homes. Most built in the 70s. Housing market is no where near as inflated in KY as in the northeast or around metro areas. Our rentals in KY we gave $85k for are nicer than the house I lived in in Birmingham which sold for $370k a few years back. It's madness in some areas.
Just got a call from my realtor, lowering prices to $2200/month to try and get someone in faster. We're going to get a painter's estimate next week to possibly repaint to neutral colors and then raise it back up to $2350/month. At $2200, we're losing $300/mo. Im sure it'll cost near $1000 to repaint only 400-500 sqft in Hawaii. Hopefully all these expenses pay off in the long run.
Hope you invested very recently or long before the scare...or else you lost your *** on those investments. lol I have friends who gave $2k for basic ARs they can't get $800 out of now.
At 800.00 each, I could almost double my money on some of those. Sent from my SAMSUNG-SM-G900A using Tapatalk
The OP is asking for a guaranteed return...mutual funds and rental properties certainly do not fit that description. Much lower risk investments would include CD's, Bonds and Annuities. But, the less risk you are willing to take the lower the return.
Direct contributions to a Roth IRA may be withdrawn tax and penalty free at any time but you'd have to pay tax on any interest. My only concern with the Roth is if you would be missing out on a tax deferred option. There is an annual limit of 6500... (I think). You may want to invest some of it now into a Roth and have your investor roll the rest in next year.
That's absolutely true. The rate of return can vary a lot over time. I didn't know my husband had anything invested until the day after we were married and he took me around and made me joint owner on everything. Now I follow the reports with him. The general trend is to follow the stock market, but some do better than that. You do have to keep track. You can't just put in the money and forget about it. But with mutual funds, you won't get calls at night to tell you the toilet is stopped up or the furnace isn't working. And you won't get a fine if the tenants don't keep the lawn mowed
I personally lean towards a more balanced approach over time. The $15K alone isn't going to effect your long-term investment plan, but it can be a great start. My plan sort of follows the Dave Ramsey approach except I put a little towards each every year, depending on available cash: -1 year of living expenses in an emergency fund, invested in CD's or money market -Fully funded IRA for the wife and I @ $11K per year -College savings fund for my 3 kids, currently invested in mutual funds. Could be used for personal use if times got hard. -Any additional savings can be used for future real estate investments A lot of advisors may not agree with the 1 year of living expenses being held in cash and other investments that aren't earning much for you. I assume it depends on your job security, but being self employed, I will sleep much easier once I have a year's worth in that fund.
