Advice on First rental investment

[Donald Danley Jr]

Hi Everyone,

New to the investing community and still trying to educate ourselves more. My wife and I live in North Carolina. I work in RNC and she is a stay at home mom who does photography on the side. 

Recently we have come upon an opportunity that is unique for us providing I have everything figured out right. We have a chance to purchase a rental property that has  two 3Br 2bath homes with a clearing for the chance for a third home. Both current homes have longer term tenants already in them whom plan to stay (to the best of my knowledge) even after sell of the property. The property numbers according to the tools on BP would need to pay out $675 a month but has low confidence of getting this. However the units currently rent for $450 & $400. I know to make this work for us I would need to secure the property agreement at no more than $90k so the cash flow would benefit us. I have a plan in place to get a Heloc to do the down payment while registering our business for a business loan to hopefully gain the needed funds to purchase the property if at all possible. My credit isn’t the greatest because of the last 3yrs financial struggles.

My problem is I have never done this before so I am lost on how to even begin. Any advice is greatly appreciated. 

Thanks

[Chris London]

@Donald Danley Jr I see the listing for the properties you mention on Zillow.

$90K w/ 20% down at a 7% loan gives you $600/mo piti payment.

This is in addition to the rate you are paying for your HELOC.

$890/mo rent cash flows just shy of $300/mo. (minus your HELOC additional monthly payment)

There appears to be a lot of land in Wadesboro so unless you already own the manufactured home to put on the potential 3rd lot it's unlikely building a house that rents for $500 would make sense at this point.

$300/mo cash flow = $3,600 per year in potential cash flow. However, these homes were built in 1940 (83 years ago). A new roof for example would set you back 2-3 years' worth of cash flow. 

A lot of good data on Wadesboro here on this Redfin link https://www.redfin.com/city/17...

Appreciation seems uncertain based on this data so with limited (or potentially negative w/ the HELOC) cashflow and uncertain appreciation I'm not confident how great an acquisition this would be. A major repair or extended vacancy and you run the risk of not paying your HELOC and losing your personal residence in the process.

IMO the market is on a long downward trend, I'd suggest just keep socking savings away (in a high-interest savings acct or T-bill or CD) and using that money to buy when home prices are more depressed. Patience to win the race. Good luck!