Investment Beginners

[Meinurgill]

My husband and I have been playing with the idea of real estate investment. We have a load of debt (which we are paying down aggressively), but we are talking about moving to a new house with the same mortgage payment, better amenities (like a garage), and keeping our current home to rent. We have a bit of equity in it now and it would make a great rental, and we could easily ask in rent what we pay for our mortgage (it's not a lot).

Anyway, today I came across a home on the listings for $30K. It needs work, to be sure. My thinking is we could snatch this up, put another $10K in with a personal loan to clean it up, and then rent the sucker out and sit on it for a while. I'm thinking mortgage+loan payments wouldn't be much more than $200, and we could probably pull in at least $400-500 for monthly rent. Once we've stashed up some cash from the rent, we could flip it and then sell it for a profit. It sits in a nice neighborhood with property values that hold or increase over time. Obviously at this price, in the neighborhood it is in, I'm expecting it to have structural issues. So we would need to have that assessed.

So, just hypothetically, good idea or bad idea? what am I missing here?

[arebelspy]

Too many red flags.

- You're in debt.
- You're talking about renting it for what your mortgage payment is, which indicates two things: 1) it's not a great rental, and 2) you aren't familiar with real estate math (that is typically a bad investment)
- You're talking about taking on more debt to fix up a property
- You don't have information about the property in question (what repairs and such it even needs)

IMO, you need to get into a better position financially.  While you do so, start to build your knowledge.

When you are in a better position and know more, you'll find a good property.

[Meinurgill]

that is good advice. It's what we had really planned on doing--we are set to pay off our credit card debt by the end of 2016, at which point we are planning to look into the first scenario I mentioned (renting our current home). I'm concerned also about other expenses--as long as we don't actually end up coming out in the red (insurance, upkeep, etc) we are thinking the house could be paid off by the rent and then we would have full ownership. I am aware that there are costs beyond the baseline mortgage payment and that rent needs to account for those too or it isn't worth it, I should have made that clear. We definitely have a lot of reading and research to do, though.

The other scenario I was actually asking about is the one I happened across today. I'm looking at the numbers more closely and you are right, I don't think it would end up putting us enough ahead on a monthly basis to make it worth another loan right now, and the risk of upkeep expenses outweighing the profit is too high. I haven't done any research on rent values either--like I said, I just happened upon it. We really weren't planning to be in the market right now.