[QUOTE=icecoldriva;882287]While I understand that the answer to many real estate queries may be “buy a house for 6-8k, rent for 500 profit/month… get rich… rub money on your butt…” I don’t believe that is a house that I want to live in for 1-2 years or an appropriate response to this question.
Brandon: I can do FHA on this house and put down 3.5% My loans will be at 3.9% +/- depending on when I close. I think I will go this route as the PMI will not add a significant % to the interest when compared with interest I would pay to get that 20k by other means (student loans not paid off).
I have found a house listed at 125k that is a 3/2 1000 sq. ft. ranch with nice updates (granite countertops, hardwood refinish, cherry wood cabinets, finished basement, modern bathrooms, etc.), garage, deck, and an 800 sq. ft., finished, basement. It will be a nice house for me to live in for a couple years and should make a reasonable rental property, for which I have a good niche/market to rent in, and should be able to rent at 1350 +/- 150bucks.
I anticipate getting the house for 115,000 all in w/ seller reimbursing closing costs.
@3.5% down = $4,025 down
taxes = 2350 (previous year at 55k SEV)
insurance ~800? (quoted 450 by 8 companies for homestead taxes)
maintenance ~ 1500?
property management ~ 1400 (~10%)
vacancy ~ 1200 (~8% with good niche market of students)
Debt service w/PMI assume 4%, 30 year fixed = 590x12 = 7080
Total expenses w/ debt service = 14,330
Total yearly profit = $2470
CoCR@1500 = 86%
CoCR@1400 = 61% (pm/va values changed to reflect rental price)
CoCR@1300 = 40%
CoCR@1200 = 17%
[b]I have two questions regarding this deal.
- Are my estimates for expenses ballpark for your average house of this nature
- Does this deal make sense to do in light of the fact that my investment options are somewhat restricted by my requirement for a move-in-ready-homestead?[/b]
Thanks for taking a look![/QUOTE]
Given the limited information about your pro forma expenses, the property, and area you are in, its impossible to give you much information about your expense estimates. However they seem reasonable. Your vaccancy line mentions a niche market w/students. Students are generally very hard on property, and turnover every semester. Also, student rental areas generally have a preadatory “code compliance office” that will victimize landlords with absurd registration fees and compliance requirements. You will not be able to fight back, as this will be a matter of policy. Keep that in mind.
Assuming your math is correct, the figures you posted seem reasonable to me, and I would not be afraid to move forward.