Does This Make Sense?

There is a house for sale in a college town (guaranteed rent every year) for 185,000. It is renting for the 04-05 school year for 20k. Lets pretend your mortgage is 1100 a month. So you rent the house, take your profit and build up a rainy day fund to about 10-15k in case something goes wrong. Then you pump your profits back into the house to pay it off. In about 10 years the house has paid for itself. Of course you have to deal with issues here and there, but that's life. So then in 10 years you dump the property for around 200k assuming inflation works like it should. Am I missing something big here? Sounds like if you're willing to front the cash, be patient, put in a little sweat, then you're good to go.

Comments(2)

  • MrMike11th December, 2003

    You probably want to add in the taxes per year, insurance, new carpet, paint etc each year and see how much you have left after the rental income.

    Your monthly payment might be closer to $1200 a month once you include the Mort insurance unless you are figureing on putting down $36K

  • DaveT11th December, 2003

    Quote:So then in 10 years you dump the property for around 200k assuming inflation works like it should.
    jeffm_60,

    Not sure what inflation has to do with the future value of a property, but I would hope that typical appreciation rates would lift the value of your $185K single-family, detached dwelling to something closer to $325K at the end of ten years.

    If you are planning to "dump" the property after ten years, it makes no sense to me to pay off the mortgage. You will pay it off anyway when you sell it. Use your excess cash flow to invest in another positive income generator instead.

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