First investment property

[Erik Fredriksen]

I am looking to buy my first investment property in Corpus Christi TX. I know with the interest rates high and home prices kind of high still. It defently not the best market for anyone.  It kind of looks like it might be hard to cover the mortgage payment with the rent.  I may make like a few hundred dollars a month but I am worried the property taxes go and rental market not. What do you guys think? 

[Nathan Gesner]

Quote from @Erik Fredriksen:

I am looking to buy my first investment property in Corpus Christi TX. I know with the interest rates high and home prices kind of high still. It defently not the best market for anyone.  It kind of looks like it might be hard to cover the mortgage payment with the rent.  I may make like a few hundred dollars a month but I am worried the property taxes go and rental market not. What do you guys think? 

 It's risky to start off with properties that do not properly cashflow. Let's say rent is $1,800 a month and you're paying $1,400 for mortgage, taxes, and insurance. That leaves you with $400 "extra" each month or $4,800 a year, right? Wrong. The reality is that one bad tenant can eat up that entire year of "extra" money and actually put you in a hole. It could take you a month to find your first renter, then they stop paying after eight months, it takes two months to kick them out, then a month to renovate and find a new renter, and the cleaning and repairs cost $3,000.

12 months of mortgage, taxes, insurance = $1,400 x $16,800

Total income this first year: $1800 x 8 = $14,400

Add four months of lost rent ($7,200) plus cleaning and repairs ($3,000) = $10,200 

$14,400 - $27,000 = -$12,600

If everything went perfect after this first year with no vacancies, no maintenance, no expenses, it would still take you 31 months to just break even.

All investments involve risk, but it's calculated risk. Now that I'm more experienced and cashflow is less important, I may take a deal that has zero cashflow and bet more on appreciation, but only after accounting for all expenses, including setting aside money for capex or vacancy.

Here's a guide that describes what good cash flow looks like and how to analyze a property.

https://www.biggerpockets.com/...