Cash-flowing property

[Bryce Robbins]

Hey BP community,

My wife and I came across a property really close by to us that will be a great buy-and-hold investment in Atlanta. It is a two level home that currently has 7 tenants in it and will continue to lease the property out after we leave.

After doing the math, we will be cash flowing ~$1,500 depending on the financing. This is where our question comes in...

We typically don't do buy-and-hold investments but this one is a doozy! It would be our first property that we would own ourselves but we don't want to tie up a lot of cash into as down payment. More importantly, our debt/income ratio would probably be too high to qualify for a standard loan. We have looked into quite a few traditional mortgage options but they usually don't factor in the cash flow every month.

Does anyone happen to have any creative ideas as to how we can get this financed as an investment property?

Thanks!

[Dana R.]

Bryce,

I've been looking at rental properties, too, and have been using BP's 50% rule as a quick and dirty method of evaluating a property.

Basic 50% rule says that 50% of gross rents will go towards expenses like vacancy and repairs.

So, 50% of $3900 would be $1950. If you put 20% down on $360K and took out a 30 year mortgage at 5%, then your monthly debt service would be $1546.

$1950 (monthly rent using 50% rule) - $1546 (mortgage payment) = $404 cash flow if you manage the property yourself.

Here's a link that provides more info about the 50% rule

http://www.biggerpockets.com/forums/52/topics/98334-50-rule

PS. I live in a college town, too. Glad to hear the place you surveyed looked like it was in great shape. Really!? No puke stains on the carpet? No holes in the drywall? : ) Best of luck!