Am I ready to buy another property??

Question

So I have been talking with my wife about buying another property and we are not sure if we are ready. We are ready mentally but are we financially ready? I won’t be shy here about what we make and what we currently own so that you guys can tell us what your thoughts are about if we are ready to purchase a duplex to live in one side and rent out the other. Please let me know what you think about our current financial situation and if we are ready! Income: $45k from a w-2 and $30k from my business I own. One rental: rent $925/month after expenses $375/month positive cash flow. 2nd rental: we currently live in this one and are a couple of months from having it ready to rent. I have rented this house before I got married but once I got married we moved back into this property. At that time before I did some rehab it rented for $975/month. Now after rehab it will rent from $1,050/month after expenses paid we will be cash flowing $345/month. Total monthly income after taxes: $5,720 Our currently bills equal around $2600 (that includes food, gas for cars, utilities, groceries, Insurance, debt service and everything. I think our debt to income ratio is right around 27%) also i forgot to mention that we have 5k in both accounts for both properties as emergency funds in case the unexpected happens that we never touch. That is a little financial statement of our life and that doesn’t include my wife’s income which she is getting ready to start earning once she finishes her certification and starts her own practice which will make her income range anywhere from 20k -25k the first few years as she is getting some traction. We have not taken that into consideration since that income obviously hasn’t manifested yet. What do you think about our income? Have we done well? Or should we keep doing something else to get us into a better position so the bank will like us, lol. Any advice, feedback, constructIve criticism would be much appreciated. Thanks, Jason

Jason Waldo · Answer

@Justin Kurpius we would never take from our reserve to finance a deal. We are working on saving up an additional 10k apart from the 5k we have set aside for both properties as an emergency fund. We are going to buy a duplex and have it as a primary residents so we can get into it for a lot less than just buying it from the start as a pure investment property.

Aaron Hunt · Answer

Live off her income, and save/invest yours. Even better!

Matt Said · Answer

Seems like if you aren't there already, you are getting close. Do you have a good credit score & are you going put down cash or refi one of your existing properties for a downpayment? Seems like planning off just your salary vs. wife's future earnings is very smart thinking, a good hedge against big issue or getting too thin. Good luck!

Adam Mittermeier · Answer

@Jason Waldo if i was in that position, and am very comfortable knowing that the property you plan to invest in will bring in your expected cash flow, then I say why not?

Aaron Hunt · Answer

Your income seems solid at $75k, but what’s with the wife’s at $20-25k? Otherwise, investment strategy & numbers seem pretty sound.And home-schooling is just something I’ll personally never understand, unless you live in the boondocks.

Adam Mittermeier · Answer

It looks to me like you would be ready for another, depending on what your goals are exactly. Just a tip, never run your finances to thin, and if you feel that you may be putting yourself in that position then simply wait a little longer until your wife will be generating that extra income. But since you said you have 5 K in each account, as long as your comfortable and have reserves, I say go for it. What type of property are you looking for? Price Range?I have very similar goals of homeschooling the children as well!

Eric Adobo · Answer

Looks good to me. Like many here ask, what are you wanting to accomplish? If another basic rental I don't see any issues.

Justin Kurpius · Answer

@Jason Waldo. Everything looks good. My only question would be how are u financing the deal? Draining your reserves to finance it might not be the best approach in this market.

Jason Waldo · Answer

@Matt Said thanks for responding! Yea my wife and I have already said to live off one income and then save/invest 100% of her income. My credit is 710 and rising. It actually has risen 7 points over the last 30 days. So I am doing what I can to track everything. We also do not plan to ever touch the cash flow from any of our properties for a minimum of 10 years. We look at this as our retirement and the cashflow to compound quickly and reinvest the dividends/cashflow. I’m 30 years old and my wife will be 30 next January so we are hoping this plan works out in the end, lol.

Jason Waldo · Answer

@Adam Mittermeier yea, I have never liked the idea of running finances to thin and want to make sure I dont do that. I am looking for duplexes that are between $150k-$200k