Possible first time investor.

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Possible first time investor.

Metodij Marinceski
Indianapolis, IN · Member since 2016 · 4 posts · 0 votes
Hello bigger pockets community. I have been struggling with a decision on what to do with my current residence. I live in Indianapolis currently in an attached condo, but I am moving soon. I am a physical therapist and have come across better opportunities that will allow me to travel. At first I thought I would sell my house, but I have always wanted to attain a property to start renting out and I figured this might be a good opportunity for me to start. I spoke with a property management company that I trust and already crunched the numbers in regards to renting out my residence...including increased tax and management fees. It looks like I can profit at the end of the month roughly 200-300 dollars depending on how much I rent at. I have set aside 5000 dollars for repairs and I would add approximately 200 dollars to this amount monthly. Basically, I am just reaching out to this community because this decision kind of scares me and would like advice. -How much money should I set aside for repairs? - are there any legal actions I should take before renting out the property? - anything you guys feel i should know before hand like common pitfalls or things often overlooked? Any information would be helpful. I'm both scared and really excited about this opportunity in becoming a landlord.
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  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @Metodij Marinceski The first step is to see whether your condo association rules allow rentals - some don't.

    The next question is whether you should sell the condo and invest that money elsewhere.  $300/month cash flow doesn't seem like a lot, especially in a market like mine, where that laws are tenant-friendly in the extreme.

    You don't say how much equity you have or what your monthly payments are.  Without those, it's hard to know where to go.  At a $5,000/month mortgage payment, $300 net isn't enough to make the risk worthwhile.  At a $500/month payment, $300 net is a lot more interesting from a risk standpoint.

    My instinct is to sell the condo and invest in flips, but if you're going to be a traveling PT, that's going to be tough to manage.

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  • Metodij Marinceski
    OP
    Indianapolis, IN · Member since 2016 · 4 posts · 0 votes
    8y
    Thank you for the response. I spoke with the association and they would allow me to rent out the home. I purchased mg home for 65K with a 10% down payment and I currently owe 40k to pay off the home. I did some cosmetic renovations...and no structural problems were found with the home. I can list it around 72-75K. My mortgage on the home is $390, plus a HOA of $150/month...which is steep. It was my first home purchase, and it is something I should have been more mindful of. I spoke with my treasury office and my mortgage would rise to approximately $450/month when listed as a rental. After all of those fees + property management (10% of rent collected)...I can make maybe 200-300 bucks cash flow. I think I am more so just thinking of selling and continuing to save until I am more stationary. My fear is that the cash flow isn't enough to cover a big expense like a water heater/HVAC/or furnace, and that money would have to come out of my pocket.
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  • DJ Cummins
    Rental Property Investor · Bethalto, IL · Member since 2014 · 319 posts · 103 votes
    8y

    Hi @Metodij Marinceski,

    will you be renting while you are traveling for work?  Personally, i like the idea of keeping the condo and letting someone else help pay it down until you are ready to buy for yourself again.  That extra equity you build from the mortgage paydown would be very beneficial in the future. 

    DJ

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  • Account Closed
    Real Estate Broker · FREDERICKSBURG, VA · Member since 2018 · 30 posts · 36 votes
    8y

    I agree with DJ. Your condo is your bird in the hand. You know your condo and the local area in Indianapolis where you have been living. Plus, I hear Indianapolis is on the upswing and great area for investment. You have a comfort level with it, you will be experiencing modest cashflow PLUS enjoying the tax benefits and likely appreciation. You will have professional management to deal with your property and you can go about your life getting settled in your new location and starting your new job. Are you really about to become a flipper or jump into lots of active real estate investing right now? It sounds to me like keeping the property you already own is a great first step to becoming an investor and then you can build from there when the time is right. Good luck!

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  • Ivan BarrattBusiness Member
    Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    8y

    Hello @Metodij Marinceski

    Where is your condo? No offense but it sounds like it'd be on the low rent side given the sub 100k value. The reason I ask is because unless you're going to rent to class A residents with strong credit I would sell your condo and move on down the road.

    I have owned and managed condos in the Indianapolis market. I'm glad I no longer own any. They are a mediocre investment at best and at worst they will be a liability. NOT an asset.

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