First Rental Property

[Daniel Pitner]

My wife and I are both 24 years old and we own a small home in the Phoenix market. Our plan is to purchase a new home and keep the home we are currently living in and turn it into a rental property but I am a little unsure if the numbers will work. I’m looking for advice on what you guys would do. Here are some of the details of our current home :

-Home Value: $186k

-monthly mortgage after escrow and PMI: $960

-homes rent for around $1300 in our area

What strategies would you employee? Long term or short term rentals? Is there not enough cash flow to make this profitable? I look forward to hearing all of your feedback!

[Bob Okenwa]

@Daniel Pitner

STR will generate more cash flow, but is also much more hands-on than a long-term rental. Depending on your exact Peoria location, the STR rates will vary somewhat as I live in the Peoria area also and it just doesn't offer all of the same amenities as one would find in Scottsdale or Tempe, although the lake isn't too far away.

The numbers on a long-term rental might be a bit hard to work. Try to find a good insurance agent to get the lowest rates for you and also have the tenant pay the water bill if possible. But if you have to start fudging so many things around to make it work, then it probably isn't a good deal to begin with.