We have a two story home, 1600 sq ft in a fairly desirable neighborhood with great schools. We have put some decent additions in the two years we have owned it (fancy tile floor in kitchen/entry/hall and new garage door). We bought it for 193k and owe 174k and monthly all in pmt is $1250.
I'd love to have a good renter pay down my loan and watch the home's value grow as well. I'd love to figure a way to pay it off in the next 17 years (when I turn 50) and have a pure income property. I have zero experience in this. Does it make financial sense?
I'd pay a property mgr, expect to pay for lawn care & trash & pest.
I conservatively think we could rent for $1500/month. Minus $150(prop mgr) & utilities $200 that leaves me $1500- $350 = $1150 net income to pay my $1250 mortgage. Is that correct? My rent is possibly too conservative.
How do I make this work?
First, your mortgage seems high. Either your interest rate or your taxes are higher than I'm estimating. If it's your interest rate, consider refinancing to something below 4%. I'm assuming 4% interest, 1% annual property taxes, and estimating very high on insurance prices and I still end up almost $200/mo lower than your payments when I plug it in to a calculator.
Second, why are
you paying the
utilities in that $1500 rent? Is this common in your area? My tenants pay their own utilities.
Third, frankly, a
cash flow negative property seems completely bonkers to me. You're absorbing a ton of risk and effort to whittle away at a mortgage that'll take you thirty years to pay off for a property that's not worth *that* much, and tying up your capital in the process.
I'm particularly biased because I'm a value investor, but I've yet to buy real estate that, in the end, didn't rent at
2x the mortgage. Granted, this is much higher than usual and I put a lot of effort in to finding good deals, but when I'm used to renting at 2x the mortgage, renting for less than the mortgage blows my mind.
I assume you're in WA, like myself?