My wife and I decided a few months ago that we would buy a rental property. We took out a $50K HELOC that we will be using for our down payment and reserve.

We live in upstate NY, so we are looking to invest out of state. Rent To Retirement is a turnkey rental company that I have been following for some time now, and we have decided to buy one of their properties and have them manage for us at 8%. I have 9 years until I can retire with a 50% pension, at which time we will be moving to Florida. We are looking to rental properties to supplement that other 50% and more.

Here's where I need guidance:

There are two options that I am weighing at this time...

First:

New construction in Ocklawaha, FL. Purchase Price: $225K. Scheduled to be built by December 2023. Projected Rent: $1,750

Pros -

- It seems like the property would have instant equity.

- Warranties on the house, so if anything fails that isn't caused by tenants would be covered.

- One of the first properties built in what appears to be a large, $250K+ development.

Cons -

- Zero cash flow after making our HELOC payment. (As you know, the payment would become lower as the principal was paid down, but initially no cash flow)

Second:

Rehabbed property in Ohio, Missouri, Indiana or elsewhere. Purchase Price: Under $200K Some already leased and others marketing for tenant. Projected Rent Varies.

Pros -

- Most would cash flow over $100 after our HELOC payment.

- Rehab has dealt with any capital expenditure projects that needed updating.

- Their market analysis says that these are in ideal rental markets.

Cons -

- Not new construction

- No warranties on the work done.

- May not have the same appreciation potential

- Not in Florida

Summary:

We have a pretty good grasp on our finances. At this point, we are able to put a minimum of $1000/mo toward whatever we see fit (savings, debt pay down, or investments). So we would be using that money for monthly HELOC principal pay down.

Does it make sense to buy new with no cash flow and focus on loan pay down and appreciation or buy a rehabbed property and be able to snowball our HELOC pay down even quicker, but in a possibly less desirable/appreciating location?

The plan is to buy and hold for at least 10 years. Trying to end my analysis paralysis here and take the leap.

Any tips, opinions or thoughts would be welcome. Thanks in advance...

Upstate New York, New York

5 Votes