Bought my first home

[Michael Joseph Allen II]

Hey BP, Some back story; I work for a new home construction company here in Lubbock, TX. I’m 24 years old and when I started was consistently encouraged to buy a home as quickly as possible for specific reasons. Fast forward a year and I’m near the end of the construction of my new home. However it hasn’t felt as, “I’m going to live the American Dream” as I thought it would be. All of this is to say, Ive been investing time and resources into my financial IQ as “Rich Dad” would put it and found BP. After reading so many stories of success here on the site and really thinking pretty heavily on my future I had moved to the conclusion of renting out the home rather than “house-hacking” or making the home my primary residence. So for the numbers I’d love to make a cash flow of 350 dollars on the property. It is 1550 sqft, the mortgage is 810, taxes 330, insurance 55, no PMI. The home has an extremely comprehensive warranty for the first two years and I had the crazy thought of just not saving for any other expenditures for the first two years in order to save the cash flow from the home and money from my 9-5 to buy another home. But I also feel like someone here may be able to explain why my gut is telling me that’s a rookie mistake. I’ve only got about 1300 of my own money invested in the home as well. All this taken into acct. I’m pretty sure the 3/2 only needs to rent around 1550 to get to my desired goal. I planned on talking to some of the property management companies around town over the next few days. Do my numbers seem correct? Am I making the right decisions? Am I being overly optimistic? What else should I be accting for? P.s. The rent for my current apt. is 900 all bills included in that number, which needless to say is downright robbery in the area. Incase that is necessary.

[Brian Ellis]

First, I commend you for starting as early as you are. I didn't start getting into real estate until I was 29. Long story short, I was a mess for the majority of my 20s, then I got comfortable renting and going about my routine when I started to turn things around. It wasn't until I was 28 that I had a goal driven mindset like you do. 

As far as what you are looking to do, my opinion is you probably wont cashflow what you expect, especially using a PM. Although it is a new construction, your repair expenses might be minimal. But whoever rents it out isn't going to take care of the house the way you would. Since you are renting an apartment for $900, realistically you are paying out of pocket $650 to live under a roof. Not bad.

For me, I would probably just live in the house and take good care of it for a while. Maybe add some sweat equity if I could. The extra $600 to live under my own roof, without having to deal with a landlord or tenants, and any of the problems that may come along with it, would be well worth it to me.