Waltham, MA · Member since 2017 · 4 posts · 1 vote
Hi, I've been thinking about investing in a rental property for awhile. Initially my plan was to buy a multifamily to live in/rent out, but I live in a high cost area, and eventually gave up my search.
Recently I came across a small, but nice condo for 95k. It was rented for $1325. Taxes are 800/ year and condo fee is $200. It seems like these numbers actually work.
price $94,900.00
down $23,725.00
debt $71,175.00
other money down to fix or clean $2,000.00
rent$1,325.00
vacancy est 10% $132.50
repairs $83.33
hoa $222.00
insurance$83.33
mortgage$404.00
taxes$65.08
Cash flow$334.75
I'm going to see it tomorrow, but I want to show up prepared. I know to check the hoa rules about renting. Any other tips? I could theoretically but it in cash, but I'd like to keep my money in case something else comes along or I want to buy a house for myself. I'm currently a renter. How do my numbers look? Thanks so much for any input!
Hi, thanks so much! Good news that it still came out positive I think! I lowered my expenses estimate a bit to 1,000/ year rather than 10%, because the apartment is so small/minimal. Nothing wrong with being more conservative though.
I wasn't planning to hire a property manager, so I didn't add anything for that, but it does still seem smart to account for, in case I want to in the future. Maybe I should for my first rental anyway just to learn from them?
For the mortgage, my spreadsheet just uses a multiplier to estimate, but when I ran zillows mortgage calculator, I used 25% down and 5% for 30 years and it came out to $382.
@Rachel Lindenthal - @Bram Spiero gave some good advice for raising maintenance up to 10% and including property management. For something small, and for your first, I suggest managing it yourself to learn what all goes into managing a rental. You will learn a lot from doing things yourself. As far as including PM - another way to look at it is that your time should be worth something to you. Always include PM!
My only concern is whether or not the HOA covers CapEx (my guess is that it doesn't cover everything). Some HOA's "own" the exterior of the house, which would cover roof and siding. Water heater, ACU, furnace might belong to you as the owner. Check with the HOA to see what is covered - if they handle everything exterior, put in 4% - 5% CapEx. If they handle everything, you should be fine without including anything.
Other than that, you ran some pretty good numbers. Kudos on remembering Vacancy!
Got it! I've bumped up my maintenance estimate and added 10% for property management. The HOA should actually cover everything for CapEx, it definitely includes the furnace and water heater. There's no AC.
Brent - those are all good questions! I won't be giving up on a live-in investment entirely, but there's a few reasons that I've been hesitant to purchase a house for myself, some personal and some work related. It's just been tough to commit to an exact location and my rental is convenient and a good deal for me. Plus even after my 25% down, I'd still have a sizable down payment leftover for something to live in. A younger or single version of me would love to live in this condo! It would save a fortune compared to my rent and it's cute too, but with me, the boyfriend, the dog, the cat and the turtle, it would be a really tight squeeze.
You make a good point though, it certainly doesn't seem like it's getting any more affordable around here!