Renting out my primary residence and buying a new primary

[Michael Ashe]

Back again but with a little more info. I want to get started in real. Estate investment, what's my current primary residence in Knoxville, TN. I've done the math roughly and honestly the cashflow is coming out much less than I'd hoped for by a long shot.

Based on similar homes here's where I'm at. $2,500-$2,700 in rent but have a $1,900 mortgage (including current property taxes) plus $100 for insurance, plus a 10% chance of no one renting and another 10% set aside for repairs.

After all that I'm in a range of breaking even or making $200 a month with this as a rental. My question is at what point is it not worth it to use this as a rental? Am I here already or have I made a mistake in my numbers assuming everything I layed out here is correct.

[Thomas Ruf]

Michael,

This is a tough one. It all depends on your risk tolerances. If young and willing to take risk, renting is an option. Even if the market corrects a bit in 2024-2025, you'll probably be slightly ahead if you can get it rented at those dollars. If more on the conservative side, then I would say you need to take into consideration all your debts. A DTI (Debt-to-Income) ratio of 50% or lower, when including all expenses you pay/month, would be safe IMHO.

You're in a good market for rentals for a few years. Supply hasn't caught up to drive rents down like they will in larger cities. However, keep in mind, once they do you'll need to be prepared for the worst. So plan for the worst in a few years and hope for the best.

Good luck!