Finance situation and first rental property

[Sandy Tan]

Am I in a good finance position to buy a rental property? My husband and I are thinking to purchase our first rental property upstate ny for about $200k so we can have another source of passive income. Here is our numbers so far. Are we putting ourselves in risk if we purchase another house for investment now or should we wait until we get more cash on hand? 

$210k cash 

$700k house loan - in nyc $5k/month

$50k car loan -$900/month, purchased the car last July

$240k combined annual income 

We save around $2k a month after all the payments and expenses

Three kids, have to hire PM if we buy a rental property. 

Good credit 800+

Unknown factors:

Property taxes on rental property 

Months fees including maintenance, fix-ups, property management fees etc. 

tenting laws in nys 

we will only put 20% down, not sure if we can afford to have another credit line  at the moment with the numbers above or if I missed anything. Would like to hear from your experience if we should just go ahead or wait a little longer. 

[Scott Crowley]

@Sandy Tan Based on the information you provided, here are my thoughts:

1) Your cash on hand and monthly savings numbers suggests to me that you have plenty of liquidity to keep in savings, allocate to the investment property reserves(also, invest in the property if not buying fully turn-key), and pursue another investment after this one(if desired). All of this being said on the basis you will utilize conventional financing with at least 20% down. If you're trying to buy all cash....no.

2) Household DTI looks pretty good from a high-level view, so you shouldn't have any issues getting financing and it appears you have a good foundation on financial management. If I was going to dig deeper, I would ask how justified the amount of your current liabilities are, being $750K combined, but I'll keep the focus on your original question. As long as you're not missing any CC/student loan/other bad debt in your numbers, all is still good.

3) Your "unknown factors" are primarily going to be dictated by your ability to analyze a deal that truly generates net cash flow in the end. Things like property taxes are public record, so you can just look those up when running numbers and build in an increase for the next assessment after you purchase. Everything else comes down to honing in on/knowing your criteria/numbers and utilizing resources such as your agent, property mgr, and any other team members you assemble.

In summary: Your financial position appears to be just fine to pursue your first investment and risk is low as it relates to your household income/debt/liquidity. Worse case scenario you completely botch the whole thing, learn a hard but valuable lesson, and you still have plenty liquidity to try again with. 

We could all find ways to justify why waiting longer is a better decision(and sometimes it is if you can't manage the money you have now). However, don't overthink yourself into oblivion, take strategic action, ask questions, let the fear of the unknown motivate you to continually push yourself to be better, and find your first investment property!