Curious what your advice/critiques/comments on these two rental properties I just purchased. I have no income to show on tax returns so I cannot get a mortgage for these. Instead I drew off a home equity line which is at 5.5%

Prices include rehab bringing it to recent comp standards and numbers have been rounded

1. Price - 77,000
Rent - 10,800 (900/month)

Taxes - 1700
HOA - 780
Insurance - 804
1 month rent vacancy - 900
10% a month repairs - 1080
Interest - about 4200 (77,000 * 5.5%)

Total Expense - 9450
Profit per year - $1350

Side notes - property is worth 10k more after my purchase price total when looking at comps. I believe this area has a good chance at decent appreciation. Also, when I purchased this there was already a solid tenant who has been there for years and would like to stay for a while. So in this example I could potentially add back the vacancy to the bottom line.



2. Price - 110,000
Rent - 16,200 (1350/month)

Taxes - 2000
HOA - 1200
Insurance - 684
1 month rent vacancy - 1350
10% a month repairs - 1600
Interest - 6050(110000 *5.5%)

Total Expense - 12880
Profit per year - $3300

Side notes - After my rehab and purchase price this has about 15k in equity. This property I also expect to appreciate.


With both properties I plan on adding 5k per property to pay down the line per month. So that should also lower the interest payment per year adding to the bottom line. The %age cash flow returns are pretty bad compared to the purchase price but I am not really coming out of pocket anything. The money was just sitting in my current residence fully paid off. I guess I should be considering the opportunity cost and where else I could put that money to make more then the combed 5.5% interest expense and cash flow+ appreciation. I had thought about just flipping these but I really feel that based on location and purchase price these could appreciate 10-20% over next 2 years.(maybe overly optimistic?)

I have read a decent bit about real estate investing and land lording so this is my first entry into it. Plan would be get these paid off and purchase another - repeat. Build a portfolio of them. Selling ones off as it makes sense with the market. Right now my biggest hesitation is I know single family homes are not the best types of properties to do this with, however I felt like they are a good place to start/learn. Any advice or comments are appreciated. Thanks

Bump. No more real estate guys around?

What city are these in ?

you overpaid IMO. Not horrible but I wouldn't have done them.

i looked for a while. one was a foreclosure from bank, another a foreclosure auction. these were the best i could find that weren't the slumlord type properties. these will attract more middle class renters which of course have the same chance of screwing you but i just dont want to own those type of properties.

maybe these would have been better just to flip. taking roughly 15% profit on both within a couple months.

I think these look fine, but really I think you are probably wasting time for the sake of trying to be safe.

As you said, multis are where the numbers start to really work, and you would have probably been better off buying one more expensive multi than these two singles.

If you get a chance to net 10% in a sale on either of these you should take it as soon as it's available, imo.

2nd one at 8.5% cap seems decent? 7.25% on the 1st seems worse but if you add back vacancy for a long-term tenant, you're almost to 8.5% as well. No idea what SFH rentals trade at, though.

Problem here is that you just don't have much cash flow. Although, if you put the free cash flow towards paying off the line each year and rents and expenses grew at 2% annually, it would be paid off in 20 years.

I'd work on refinancing your home equity line. 5.5% seems high.

I think the first property doesnt have enough cashflow for me personally to justify the risk.
The second property is significantly better and I would hang on to the 2nd one. Appreciation to me is just extra. I never really count it as an exit strategy unless I use force appreciation.

For your first properties though, I think there great and will be a great learning experience for you.