First Rental Property.
I came across $5,000 cash. I have no steady income from a job. I am looking at buying a rental property on contract for $2k down. It is a low-end property but could flow 100-200/month. I would have $3k left over for vacancies the first couple months(if there were any). I wouldn't forsee anything costing a couple thousand to repair.. so I think I would be ok. Any suggestions?
Can you be more specific? How did you figure your cashflow? I am all for people putting temporary windfalls into investments since otherwise the money tends to get frittered away. But of course, you do have to have some way to pay the bills.
Hey,
Not to be too big a jerk, but how do you come across $5000?? Seriously, if you refinanced your house to get $5k or if you borrowed from the local loanshark or if someone past away and left it to you, makes a big difference in the answer.
I don't think you have given us enough numbers to work with. What is the monthly payment, rental amounts, insurance and other expenses, etc? How many units?
If you have no steady income, how soon will you need that $5K? You should only invest in rental property with money you don't need to touch for quite awhile.
Sorry for my broadness. I had two cars, a nicer one and a beater. The nicer one was totalled and i'm gettin about 5k(gotten a little over 3 so far). I have NO living expenses w/ a commission only job(realtor). Yes I will be having income but it's not a steady cashflow. If all goes well this week I will be making an income of 1500-2000 for an offer I will be making. My dream is REI, not being a real estate agent. I was thinking of getting a headstart. I think I will hold off, though. The homes I can get with that kind of downpayment wouldn't have tenants that are very reliable. (25k home renting for $300-$400/month). Good cashflow, low end tenants.
Thanks though
Chase
Quote:
On 2004-03-16 23:18, DaveT wrote:
If you have no steady income, how soon will you need that $5K? You should only invest in rental property with money you don't need to touch for quite awhile.
If your only concern is the tenants that you would get with the kind of house you can afford to buy, I wouldn't worry about that. Maybe someone else has had a different experience, but I haven't noticed any difference in how well tenants pay based on how nice the house is. Even low income people have to live somewhere. Just because someone is living off S.S, disability, or works at a low paying job such as a teacher's aide doesn't make them any more of a credit risk. As a matter of fact, if you pick the right low income tenants, you are probably more likely to get paid because they have a government guaranteed income, or can pick up another job for a similar low wage very easily. It's all in the picking!
Don't let anyone talk you out of your dream. Until you buy that first property you'll only be dreaming. You have a good credit check done on any tenant. As stated in previous response jut because someone has a low income does'nt mean a bad payer. Section 8 a possibility, someone who has a job and pays a portion of the rent. Turn around and buy another and so on and so on Good Luck
Hey,
I don't know your area, but buying a house for $25k, renting for $400 and clearing $100-$200 seems EXTREMELY unrealistic. Maybe I read your numbers incorrectly.
On the idea of low income tenants being more or less dependable than higher income, my experience has been that the reliability of tenants (based off the value of the house) is a bell curve. On both ends of the curve, you can NOT count on getting paid.
If you stop and think about it, this makes sense. Someone who is renting a house for $200, doesn't really care about losing a deposit or ruining their credit. On the other extreme, the only reason that someone rents a $350k house is because they can't buy one, due to lousy credit.
Years ago I had a "friend" who only bought $300k houses (using Lease Purchases). He then L/P to someone with horrible credit, but with cash. Surprisely, there are a lot of people like this. He said on month one everything was fine, on month two there would be a brand new car in the driveway, on month three there would be a new boat in the driveway, on month four there would be some other new toy and on month five, they stopped paying their rent and moved out. So he ended up L/P the same house 3-5 times and pocketing the deposit.
I am not overly familiar with his particular city, but the numbers seem in line with what I know of other areas of the state.
Generally the good deals won't make it onto the general publics radar screen. The realtors have a short list of buyers they know are a sure thing who they call as soon as something fitting the profile pops up.
Mykle
Quote:I came across $5,000 cash. I have no steady income from a job. Any suggestions?Ruman,
It would seem to me that you don't have adequate cash reserves to do landlording. Your variable income would make me more cautious about investing in rental property. Doing so ties up your money, and does not leave you any easy way to get at your money when you have too.
Why not consider tax lien investing? With your reesources, you should be able to research tax defaulted properties, buy the tax liens for those properties that are likely to be redeemed, and collect a nice premium on your relatively low investment.
If you get lucky and a tax lien is not redeemed, take the appropriate steps to acquire the deed, then sell the property for a nice profit.
Ruman,
There still isn't enough information available but I'll give you my best guess. If you get the $400/month, and if you get the house for 25k max including all repairs, closing costs etc., and if you pick the right tenant, you could probably get your lower estimate of $100 clear/month. That's a lot of ifs. If this is truly a low income area, I would try to get that investment below $20k to makes things more appealing.
In regards to the issue Bruce mentioned above, there is a way to address the problem that I have found works well for
me. Basically, you simply have to be very selective in your properties for starters. I won't go into all the specifics here, but if you only go for the best deals, on the nicest houses in a low income area, you can get reliable tenants. If your house is one of the nicest on the block, but your rents are at least 10% below everyone elses, even someone with a low income doesn't want to give up that kind of deal. This is only your first line of defence. Then of course you have to carefully select your tenants. Basically you simply look for someone who has a good reason for being low income such as I mentioned above. [ Edited by davmille on Date 03/19/2004 ]