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Updated almost 7 years ago on . Most recent reply

Account Closed
  • Waco, TX
1
Votes |
15
Posts

Buy, rehab, rent/hold, buy a 2nd?

Account Closed
  • Waco, TX
Posted

My wife and I bought a SFR to live in, in Aug '17 and finished the basement for ~$18K. We will move out in Aug '18 due to a job offer, and we'll have built 10% in equity, including downpayment, at that point. I plan to rent it out hoping for future apreciation and perhaps a couple hundred dollars of cash flow before vacancies, maintenance, etc. It seems we would just break even if we were to sell at this point. And a cash-out refi was not encouraged by realtor because interest has gone up since I bought.

We'll move to an upper-income college town, and the new job will bring in significantly more per year. 

If we qualify, I would like to buy a 2- or 3-bed condo -or duplex, but they're rare in the new area- so we can live in it while we save for another downpayment, then move out, and rent the condo to students (having college kids as roomates is not an option). What mistakes am I making here? Is this plan naïve?

Most Popular Reply

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230
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Jeremy Z.
  • Tacoma, WA
257
Votes |
230
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Jeremy Z.
  • Tacoma, WA
Replied

@Account Closed

perhaps a couple hundred dollars of cash flow before vacancies, maintenance, etc.

If the market rents only provide $200 before expenses (don't forget capex) I think you will find that the property will actually cost you money on a monthly basis. Principle pay down and appreciation might still make it a good investment, but you may be better off selling and finding something that provides a better rent/price ratio.  Read up on the 1%/2% rule and 50% rule. But be careful of chasing cash flow in questionable locations. The rent might be high compared to the low home values, but expenses will increase. I'm not saying you definitely should sell, just that you should be aware of the actual cost of ownership.

Condos can be nice low-maintenance properties, but the same rules regarding expenses apply. Make sure you are factoring in all expenses including the condo association fees. If you plan on being a serious real estate investor, learning to analyze all of the income and expenses is key. Best of luck!

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