Originally posted by @Don Konipol:
@Alex Gaeta
There aren’t many desirable locations where one can receive a positive cash flow utilizing 100% leverage. Caps rates are too high (rents low in relation to sales price). Investors use methods ranging from buying class c or d properties, in marginal areas, or make tons of low offers to get one accepted. In this market it’s very difficult finding a place you’d want to live and that would provide a positive cash flow if rented while utilizing 100% financing. Some investors have been successful pumping income up by creating a short term rental out of the property. But not sure the best StR properties are the ones you’d want as your personal residence.
While I’ve often kept my owner occupied residence asa rental after moving out, I don’t utilize high leverage and often pay cash, which can change the equation dramatically. There are many other benefits to owning rental property other than cash flow....there’s equity buildup with each principal part of the note payment, possible tax benefits, future rent increases, inflation hedge, and long term capital gains, as well as a step toward retirement funding once the mortgage is paid off.
I figure that with 100% loan I will not have much wiggle room to make tons of money but would it be prudent to purchase noting I could cover my mortgage, Insurance, taxes and HOA in the future if I decide to rent it? From what I understand the average raise in rent is 3 to 5% in the area. Any income would be an infinite return on investmen but I don't want to be upside down either. I could pay more into the mortgage and then refinance over the years I live there if that even makes sense? I don't believe that 2008 will happen again and I don't want to be on the side lines but I saw my father loose a ton of money cause he was banking on equity instead of cash flow.
If we go to a town where the housing is cheaper the schools are typically very poor. If I put my daughter in a private school it would be another $1000 a month which is a large sum. I could put that $1000 dollars to work in investments or even into the house.
In this area I have seen short term rentals go for a premium as we get so many snowbirds from New Jersey and New York. However, it would require a fully furnished home and also be dependent on the HOA rules.
In regards to taxes they would have to be over $24k for filing married jointly as that is the new standard deduction if I am not mistaken? First year of ownership on a $380k house would be around 17K in taxes so would have to make sure that would be beneficial with my accountant.
I guess I need to crunch some more numbers or stay on the side lines.
