Posted by Gary on January 20, 2001 at 21:30:58:
First, you need to do a more thorough analysis on your expenses to pin down the cash flow. Also, what are the demographics of your area? Many stable professional singles looking for one bedrooms or are these transient military people? Vacancies can kill you on this type of investment. Any past history on vacancies and other expenses with the property from current owner? If you invested $30,000 (down payment plus closing costs), $7200 a year cash flow would be a 24% return. That’s respectable but just make sure you don’t inflate the cash flow. What do you mean your mortgage on your townhome will be about the same if you refi to get the 26k needed for the downpayment? Same monthly payment but longer term? How much “cash flow” would you get if you refinanced your townhouse without increasing your loan amount by $26-30K? You may want to consider refi your current mortgage at current balance and then taking out a home equity loan for your real estate investing. In this way, you may later refi investment properties and pay off the home equity loan; avoid co-mingling your private home first mortgage loan with your investing. The home equity loan would accomplish this but others on this site may have some other advice…