Buying investment property to rent

[Jash Sayani]

Hi,

I am interested in buying a property in a city like Orlando FL, Miami FL or Ocean City NJ. They seem like good locations for value retention and the houses are in the $100-$120K range. If I pay 20% down and get a mortgage, I could rent the place to cover the mortgage costs and HOA. All I would have to pay are the property taxes. I plan to hold for longer term (5+ years).

Here are the questions:

1. What are good cities for rental properties?

2. Is there a way to find a property manager that finds renters? If so, what are the costs?

3. Is there a way to use money in 401(k) for the 20% down payment? This would also be an investment (better than 401k funds in my opinion).

[Bill S.]

@Jash Sayani Denver is a great place but there are no $100K SFRs. You really need to reconsider your criteria. Buying a property and then paying out of pocket each month to own it (paying property taxes) is a sure way to become a real estate investor casualty. The other costs that you did not mention that you would be paying out of pocket would include, maintenance, vacancy, property management, capital expenses (new roofs, new ACs and etc). I think it would be foolish to consider those to be less than 25% of the rents you collect. Most people are closer to 50%. What that means is that if your property rents for $1,000 per month you would need at least $250 per month to cover minimum expenses and probably should be closer to $500 per month. It doesn't take long to own 2 or 3 properties you are feeding at the rate $500 per month per property for you to decide that real estate investing is not your thing. At a minimum, a property should pay for itself.