It seems to good to be true. My math must be wrong. Please let me know what I'm missing. Basically let's assume no depreciation and not exceeding $300-$400/month maintenance budget to much.
House price $750k for 3 family with 2-3 br on each floor in area with $2500-$3200/mo rent. OK:
$30k down
$720k financed
$4500/mo Mortgage with tax, insurance and PMI
$8500 Rental income + $1000 (additional payments to principal)
7 years (Time to make 85 payments of 8500 which equal the financed amount)
What am I missing? 8500/mo for 7 years is $720k-ish. No need for 30 years to pay this off right? Am I mistaken? I've done the math on several properties and get same results.
New to Real Estate · Waukesha · Member since 2019 · 96 posts · 43 votes
6y
Tenant's paying water bill and utilities ? Are you going to use a property management if not may still want to put that in with your numbers .cause later down the road you may not want to be taking care of that or don't have time ? Also vacanties and lawn care
Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
6y
In addition to the multitude of other issues, you are also making the (terrible) assumption that you will not need to put any money into the property the whole time you own it. Not how real life works, roofs need repairs, furnaces break. Also, if you have to evict someone there's more money you need on hand, plus no income for that unit for several months. Cant pay a lawyer or contractor with the equity in your house.
This also doesn't take into account the multitude of theories on whether or not its even a good idea to pay down the mortgage. I think you should back up and do a little more research before you dive into something and end up in over your head.
I too hate owing “people” money but if the interest rate is low enough it really can be considered free money. If you’re willing to live there for a year get an owner occupied loan (lower interest and origination charges.), apply for a 15 year loan (lower interest rate) and then after a year you can move out and get a 3rd renter.
If inflation is 2+%, then you can pay 3% interest, subtract the tax savings, and you’re close to break even.
I too hate owing “people” money but if the interest rate is low enough it really can be considered free money. If you’re willing to live there for a year get an owner occupied loan (lower interest and origination charges.), apply for a 15 year loan (lower interest rate) and then after a year you can move out and get a 3rd renter.
If inflation is 2+%, then you can pay 3% interest, subtract the tax savings, and you’re close to break even.
How does the tax savings work? Are there any calculators for that, that you recommend? I tried
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
I hear that. I’ll be 52 in a couple months. You see 2045 on a loan payoff date and you don’t think it’s a real date. Like when I saw kids with high school letter jackets saying 00 or 01.
In addition to the multitude of other issues, you are also making the (terrible) assumption that you will not need to put any money into the property the whole time you own it. Not how real life works, roofs need repairs, furnaces break. Also, if you have to evict someone there's more money you need on hand, plus no income for that unit for several months. Cant pay a lawyer or contractor with the equity in your house.
This also doesn't take into account the multitude of theories on whether or not its even a good idea to pay down the mortgage. I think you should back up and do a little more research before you dive into something and end up in over your head.
Thanks for feedback. I'm in NJ market too. I'm saving $300+/mo for maintenance. $3600/year. I can easily double that number if I have too in an emergency. $8k is the number where I'd start to get nervous. Also, a lot of my strategy will rely heavily on getting and exceptional inspector AND not rushing into the wrong house.
I've never seen long vacancies. Where I live, I'll see a new tenant within 2-3 weeks when somebody leaves. Not enough places available. BTW, that 2-3 weeks is for a nice place with 1.5 stars....