Ottawa, Ontario · Member since 2018 · 5 posts · 0 votes
Hi there, I am wondering can I make profit from buying a brand new house and renting it out after 1 year then sell that house after 5 years if the price goes up significantly?
House price is about $450000 (Single, 3 beds and 2.5 bath) and I plan to rent it out around 1800 - 1900/month for about 5 years then sell it but I don't know if I will make some profit after I sold the house.
Sorry for rookie thinking since I am very new to real estate and does not have much experience.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
8y
So...ummm...let's play "simple math"...
$450K purchase price, 25% down...
30 year fixed rate mortgage at 5% on $337,500 is $1,812 per month...
So if you have zero vacancy you'll break-even on the mortgage...
And then burn money on maintenance, cap-ex (likely very limited), any vacancy, property taxes, insurance, etc.
Consequently, you really, really, REALLY need that home price to go up. You'll be bleeding money every month and year until you see it at that future profit. And you'll have to factor in costs to sell (like realtor fees) when you do go to sell. So that spread (i.e. "profit") will have to pay you back for all of those monthly/annual losses...and then some...then you get taxed on what's left...and unless you 1031 there's depreciation recapture...
Ottawa, Ontario · Member since 2018 · 5 posts · 0 votes
8y
WOW, thank you Andrew for your reply, it seems like if I purchase a brand new house, I will have to depend on the home price to increase and the chance is hard to predict. Thanks again for all the informations you have provided.