Whats my problem??

Question

OK  here is the deal.  I already own one rent house in my home town [Rural West Texas]. I have owned it for about 9 mths.  I want to buy another one for about 21k about 3k in repairs and it will bring 400 a month. I do not understand it but I keep having major anxiety about just doing it. I have already passed up several in this range just because of fear. I am not sure what I am asking for here?? Why am I so stressed over 21 thousand dollars? I will go down and and shell out more for a new car and not think a thing about it. My wife says I crazy . Does any one else have these self doubts? : :crazed:

N/A N/A · Answer

I pretty much have to agree with ryan here....well put my man.

Also, always always always always always always, If you are ever in doubt about ONE deal, line a few more others up and see how they all shake seperately, don't limit yourself to one deal because you will not be able to guage the market or even the quality of the investment at ALL!

and trust me when I say that you would not be loosing out on anything by not jumping on it.

there are always the bigger better out there, you just need to fish em out.

Once you get pretty good at the due dilligence you will be able to pick out the good from the bad in your sleep...just takes experience and you'll get there.

Ryan Webber · Answer

I'm in Texas also, and I'm just not feeling you on this one.  I haven't seen any increases in insurance or property taxes in the last four years of my investing, and my rentals have done very well.

Now don't get me wrong, I am moving a good amount of my portfolio towards carrying notes but not because I'm not making money on my rentals.  It's because of the hassles.  I've grown to a point that I am looking to streamline my business, and its worth giving up my equity for the consistent low hassle payment.

Remember, also, one of the major downsides of carrying notes is that your equity will only decrease from that point on.  In 10 years if that property has appreciated 5-10% a year, that new equity is not yours.  Your profit potential, THEIR balance, was frozen at purchase and will only decrease in the meantime.  If you hold a rental for 10 years, that equity is yours, and YOUR balance owed has decreased in the meantime, which increases your profit potential on the property.  All the while you were making money on the rents.

There are several advantages and disadvantages to both sides, and weighing those for your personal investment goals is important.

Also in reference to the specific deal, I wouldn't necessarily agree with All Cash that financing the deal is suicidal.  For me personally the numbers are kind of tight, but if after all your expenses (including maintenance and vacancy) you could expect to make atleast $100 per unit, then I don't think its all that bad a deal for that low of an investment.

Reasonably for most beginners, you will have to start small and work up to bigger and better deals.  Something like a small, low risk, rental is a good safe place to start that will help you get comfortable with investing.  Self doubts and apprehension are perfectly normal on your first couple deals, but remember to trust your numbers not your emotions.  As you move onto the bigger and better deals each new investment level will bring those apprehensive feelings back in different degrees, but you will be building on the confidence that you built from your prior deals and your prior ability to work through and manage your apprehension.  It's a process.  Be patient and be diligent, and you will build the confidence that you search for.

Frank Adams · Answer

We all go through the same stresses. The only thing that would concern me is being TX you're getting hammered for insurance and taxes, both of which will increase faster than the rent (probably) would.

That's one reason I quit doing rentals. I found that for the same money (you are paying CASH right-as borrowing that amount is suicidal), I can flip it, at probably $40K-$50K, get $2K downstroke, charge about 9%-11% on a 30 year amortization, 5-10 year balloon and come out much better.

The biggest downside is the "rural" part. Is there a ready pool of buyers?

BTW, I'm always in the market for stuff in that price range but you're probably too far away for me to mess with it.

all cash

N/A N/A · Answer

The problem with flipping in this area is the quallified borrowers part. Just not many people have the money for a down payment. And you are right about taxes and insurance!!! We do get hammered in Texas don't we?