First Rental! 50k to invest. Marietta?

[Chris Jensen]

Hello Bigger Pockets!

I am currently looking for my first rental property. I have ~50k for down payment and the credit to purchase. My goal is to start my rental portfolio. I was looking at SF homes in Marietta and Sandy Springs. Im open to deals in other neighborhoods. Any recommendations? Heres the numbers on a 3b/2b for 230,000 with 20% down.

 Should I be looking for better returns on my starter property? Have seen properties for 220k. Not looking to due any major renovations.

Any input/feedback is appreciated

[Julie Kern]

Hey Chris! 

To answer your question, yes, I think you should be looking for better returns. 

Keep in mind that 8% PM fees is a bit inaccurate when you factor in an annual renewal fee of $200/yr and lease up fees of one months rent every time the property turns (turnover every 2 years would cost you an extra $750/yr, which, coupled with renewal fees adds $79/mo to your expenses). 

Also, I would budget for 8% vacancy (1 month). If you’re able to get a property leased up in less time, great, but still better to use a more conservative #. Using 8% adds $45/mo to expenses. 

Also, your property tax # is too low for Cobb County. I would have to look and see what I paid on mine this year, but $1500 on a $230k property in Cobb is too low. I was well over $2k on my personal residence of similar value, slightly more, and that’s with a homestead exemption. 

Finally, you’re only budgeting 6% (~$100) for maintenance and CapEX, and that’s much too low. I would use at least 10, depending on how old the major systems are. 

Other things to consider - is there an HOA? And check your insurance estimate also, I pay about twice what you have budgeted on my personal residence but I know my premiums are higher than they should be because I haven't shopped around in a while. And with Marietta (or any cities) make sure you aren't in the city limits where they have additional city taxes on top of county taxes. I got that nice little surprise after I bought one of my first properties and didn't think to check. Kennesaw city taxes run me an extra $400+ a year on 2 different properties.

So, all that said to say, with the scenario above, you will be cash flow negative for sure. Not to mention if you're buying off the MLS, you're likely paying top-of-market prices right now. Be patient and look at a lot of deals before investing that $50k.

I’d be happy to discuss with you more if you want. 

Best wishes to you and congrats on taking action!!