My DH and I are 27 and we paid off our home four months ago. Since then, we have been saving for a down payment on a rental property, and have around $30,000 now. We bought our house near the bottom of the market about three years ago for $57,000 - a fixer-upper, but all cosmetic (flooring, paint, etc). I know that we live in one of the "less desirable" sections of our county (but we like it). We have been looking for an investment property for about two months, and have not seen as many fixer uppers. In our area, it seems they are going for more too - around $80,000 or so. We are considering buying our rental property in the "better" part of town to be more attractive to renters. We are seriously considering a home that is $129,000, more than double what we spent on our home. It is a little dated, but not a fixer-upper. It is right by the university I work at, so we believe we will easily rent to grad students/faculty. It is not in the "student ghetto" but more in the nice neighborhood by the university. We were not even expecting we would be able to afford something in that area, but since this is older (1958) it is a much lower price (we are buying from the original owner though, which is nice). For instance, a 2006 two story home sold for $175,000 just recently on the same street. Another home on the same street that was built in 1964 that in my opinion is not as nice as ours sold a little over a year ago for $137,000. Therefore, even though this home is more than we thought we would spend, we still think it is a good price, will probably be easier to rent, and will rent for a higher amount.
My big holdup is that theoretically we could get a house $30,000-$50,000 cheaper - it will either need work or be in a less desirable area, or both. However, we would be able to pay it off that much sooner. Yet, it will likely draw a lower rent income.
Any thoughts?
