Looking to purchase my first rental property

[Phillip Stephenson]

Hello All,

My wife and I are looking to buy our first rental property and hoping to get some advice or guidance on the process. Our desire to purchase a rental comes from wanting to generate some income separate from our current employment. Also, we have always been interested in owning real estate as we are fond of tangible assets.

Currently, my wife and I live and work in the Cayman Islands but we are originally from the DFW area. We are interested in the Central Dallas area as we know it is stable and continuously growing. Ideally a property that is small and easily manageable would be best as we need to be hands off and use a management company. Maybe a condo/townhome would be best, not an expert but I imagine they are bit easier to maintain. Our #1 priority in a rental is the ease of owning it and the learning experience it will provide. Earning cash is something we can be patient with until we are fully comfortable with the ways of being a landlord (or maybe not comfortable and we will sell it and move on to another dream).

Basically we want to take it slow and easy. Below is a list of our financial parameters. We have left a significant amount of buffer so that even if the whole thing goes belly up we can still continue our lives without worry. Also included below is a monthly projection (could be completed wrong) we created just so you can see our financial thinking on it. Let me know your suggestions, criticism or advice.

Financial Parameters:

Purchase Price: up to 125,000

Down Payment: However much is needed for reasonable financing. I assume 25 - 30%

Area: Central Dallas (Uptown, Downtown, Oaklawn, etc.)

Time Frame: We are very patient and in no hurry.

Monthly Projection:

Projection for monthly budget based on purchase price of 112,500 with 25% down plus 4% closing and 5,000 in renovations. P&I is average over entire mortgage period. Numbers assume 1 month of vacancy and rent of 1,250.

Mortgage - Principle	234
Mortgage - Interest	187
HOA	175
Insurance - .006% of purchase price p/yr	56
Taxes - 2.5% of purchase price p/yr	234
Mgmt Company - 8% + 50% Leasing	152
Maintenance Fund - 1% of purchase price p/yr	94
Total Expense - Monthly	1,133
Total Expense - Contract	12,460
Unoccuppied Expense	981
Total Expense - Yearly	13,441
Total Rent - Contract	13,750
Cash Flow - Contract	309
Cash Flow - Monthly	26
Cash-on-Cash Return	2.06%
ROI % - Yearly	8.06%