I've been reading this forum for a little while and just registered.
I just bought my first rental house. 1,450 SF, brick ranch, 3/1.5, large kitchen and covered parking. (carport). Only 50% of SFR in this area have covered parking. My parents have had rental property in the same neighborhood for 60 years (yes, 60 years) and I lived in the neighborhood as a child (which was a long while ago). I no longer live in that town.
I know the rental market in this town and I will be using a property management company that has been in business 35 years and they ONLY manage rental property. There is a chronic shortage of affordable SFR in this town (lots of apartment complexes).
My rental is 2 miles from a military base, 1 mile from grocery shopping, 2 miles from the mall and restaurant row and 2 miles from downtown.
I bought a foreclosure in need of renovation. I did so intentionally.
Cost incl closing: $47,000
Budgeted repairs: $20,000
Overages: $5,000
Total invested: $72,000
Market value when finished: $87,000 (average sales price in this area for a fully renovated SFR is $60 per SF).
I knew I would have to fully renovate the house now rather than kick the can down the road a few years.
Improvements are:
New Roof
New replacement windows
New bathrooms (stripped to the studs)
New Kitchen cabinets, flooring, appliances.
New carport roof
Some new plumbing
Some new electrical work
Excepting the roof, windows, plumbing and electrical I'm doing the work myself.
The market rent is between $800 and $850 per month. The management fee, taxes and insurance will cost $270 per month. In gross terms the ROI is just over seven years. My savings was only paying 0.15% interest.
I have no mortgage on this property. Per my read of the IRS rules, I can take expenditures against ordinary income for last year (bought property in September) because I materially participate (I hired and supervised the workers, plus I do a great deal of the work myself). I expect to have it available for rent 1 April.
I earn six figures. I have ten months of take home pay in ready cash and if I were to economize I can live one year without further income. I max my 401K plus the over 50 "catch up". I have no consumer debt. For short term disability I have ten months of sick leave accrued. I have a long term disability policy.
Worst case I lose my income, lose my house and have to relocate to my rental which is paid for.
I have a mortgage on my primary residence which I have no intention of ever paying off. I consider it a current living expense and will sell when I retire. My mortgage is less than rental for this area.
I think I'm doing well but: what am I missing?
EDITED: The property is insured for $125K which is the lowest amount of coverage I've been able to obtain.