Which Choice would you choose?

Question

Currently my wife and I are looking at 1 of 3 different options. We are setting up appointments soon to walk through after the first of the year.

First option I personally like, is a SFR close to our other 2 rentals that is sold by owner who seems to live out of town. It is currently rented until July. from outside doesn't look that bad. Roof probably in another 5-7 years, Air conditioner looks old so of course if it goes out will need to be replace because of the new refrigerant. Pictures looks good but as we all know looks can be deceiving. 2 brm on slab about 810 a month, they are asking 62k.

Second option, Found a duplex both rented out currently all brick and has garage off alley one for both unit. Looks like it has a 3rd stall for possible storage of maintenance equipment. It is on the high end of our budget with the 20% down. Probably could swing it but be tight with little cash available for any issues. 2brm each side 700 per unit, they are asking 120k

Third option, Wife personally likes. SFR Empty, all brick, new carpet move in ready 2 brm may need a couple new appliances, location good right next to a grade school. Pictures look good, we can be selective on new tenants, possible rental 850 asking 64k

My thought process is why do I want to work to find a tenant in middle of winter if others are rented. This is instant rent coming in, if there is any issue with a tenant breaking contract give them a notice, evict and move on.

Walter Key · Answer

@Chris Sukala So it sounds like option three is by far the least lucrative deal. Listen, I'm married too...I fully understand the realities of "Happy Wife, Happy Life." But, I'm willing to bet your wife is a very smart woman (I mean, she married you after all, right?). Once you explain those profit margins to her, she probably won't like option three much anymore. So, that leaves you with option 1 and 2. Option two looks like it needs a bit more Due Diligence. If you're going to hire out the mowing and plowing, you really need to get some quotes and factor that into your bottom line. It may eat away allot more of your profit than you think.As for taxes, don't sweat that. Are you or your wife pretty savvy with taxes? Have you filed your own taxes in the past? My wife files ours online herself, despite having multiple properties on the books. She pays for the higher end tax software to ensure all our business expenses are accounted for but we've never taken a loss come April. We're a family of 5 with the kiddos ranging from 2 Y/O to almost 13 Y/O. I will give a word of caution though, if you're not comfortable doing your own taxes, don't hesitate to take them to a professional and pay the extra money they'll charge you to ensure they're done right. There are some things money CAN buy. Peace of mind is often one of them.

Chris Sukala · Answer

Account Closed our 2 rentals are in a .25 mile radius of option 1 and 2, which i like, option 3 is about .5 radius not bad. Both of our existing rentals are 100% remodeled after everything is said and done we make 20% on First and about 20%plus on the second. Our second SFR we bought free and clear but we have some remod expenses I am paying for. after remod expenses are paid for,our second rental will be 60%.We do everything ourselves, if we go with the duplex now I will had to add mowing and plowing to the mix which I probably will hire out. Our SFR the tenants are responsible for this. Just ran some quick numbers and option one if buy at full asking we could achieve 24%. Option 2 about 48% but will reduce if I hire out mowing and plowing and my wife option about 6% because of taxes. All my percentages are after everything is paid for (taxes, water, garbage, insurance).This is all before the dreaded income tax. This is our first year with both rentals so unsure what we will have to pay. We are new at this so any advice would be much appreciated. Having my realtor check on amount of baths in the duplex now.

Account Closed · Answer

How many bathrooms are in each SFR?

Perry Ivy · Answer

An old man gave me marital advise he said, "do you want to be right, or do you want to be happy?" I think your wife wants the house close to the school :)

Walter Key · Answer

Chris,Have you ran an analysis on each of these to see how the numbers play out for each? For the first option you mentioned, you have two other rentals in the area so...how are those performing for you? Is the area and your rentals there conducive to your investing goals? Also, do you use a property manager for those two properties? If so, how are they working out for you? Will they offer you a discounted management fee if you bring another property to the table for them to manage? I'm sure you noticed that I didn't actual give my opinion on your question. Hopefully this "food for thought" will help you come to the right decision for you and your wife.

Richard Fields · Answer

Personally, I like the tenants in place. I'm going to look at a triplex this afternoon with all 3 rented out, bringing in $1600 a month

Chris Sukala · Answer

I would honestly like to buy all 3 but I do not have the cash for down payments for all. Any ideas on that also. Thanks