No money, good credit and already have renters

[Joshua Huffman]

There is a house for sale but I don't have a job, excellent credit and only $1,000. I know someone who would rent it from me if I could get a hold of it, but i cant find a way to get the money. Any answers? or anyone want to give me a $110,000 loan?

[Alex Craig]

Jon---that 50% rule I have never found to be applicable. It is not a bad benchmark for worst case scenario. Out of the 9 properties I own, I do not have 1 property over the 4 years that I have owned them that has cost be 50% of my income. Here is a pretty standard deal we offer our investors.

Purchase Price (turnkey) $55,000
Rent: $925
Deposit: $500
Taxes: $115
Insurance: $30
Property Mgmt: $75
Vacant Rate (8%): $74
Repairs (10%): $92
Total Cost: 41%

To date, 41% would be high. I have found if purchasing a house with renovations, doing them at a high level of standard on the front end avoids most maintenance. I rarely have to pay for leaky faucets, running toilets, etc. It helps that I do not include appliances and that we make the tenant pay for anything under $100. Putting some of the liability on the tenant usually makes them take a little more care of the property.

Not trying to bust your chops and say that the 50% rule is incorrect, more or less indicating that each market is different. To use the 50% as a worst case scenario is not a bad idea in budgeting your properties, but each property should be examined to the cost of each respective market. I would not one a new investor to get discouraged by being scared off by this 50% rule.

Lastly, if you can do your own repairs, the $ saved on repairs is huge!