Jess F. Hi Jess, I have invested in two buy and hold houses in Manassas and Woodbridge lately. I live in Falls Church where no houses can cash flow. However I was able to find two houses less than an hour away that can cash flow even with more expensive type of Commercial Mortgage as I bought them in LLC. Here are some numbers for your reference. Feel free to contact me if you want to learn more.
Manassas: SFH, built in 1950s but was remodeled by the previous owner. Bought for $299,500, 25% downpayment, 3.85% interest rate, amortized over 25 years. So monthly payment of PITI is a little less than $1500 per month. Rent out before the closing so only have it vacant for week. Very lucky this time. Great renters with good credit for $2100 per month. Cash flow $600+ per month. So far only have some small maintenance but I do expect some
Major repair with the next 5-8 years. So the cash will probably mostly be saved for a new roof, new hot water heater and some other unexpected repair.
Woodbridge: TH, built in 1985 and also remodeled when I bought it. Paid $200,000 with $5k seller subsidy. It took a little over a month to get the right tenant. The price level and the area attracted a lot of low credit score people. I finally decided to rent to a mom with two daughter who are on county subsidy (section 8). Monthly payment $1077 and rent $1450. Tenant pays $720 and the county pays $730. I do think this tenant will stay for many years and have less vacancy cost down the road. The house won't have a lot of repairs down the road.
When I am looking for rentals, I look at Cap Rate (gross rent/purchase price), return on cash (net rent / cash invested), monthly cash flow etc. You need to have enough cash flow to cover potential vacancy (I use 10%), potential fixes and capital reserve (10%), and the property management (10%) ( I manage those myself now but I plan for the worst, if we need to move out of the area for example, we will need to put it under property management and the cash flow needs to be enough to cover that cost) and see if the cash flow is still positive. Ideally you still have a few hundreds positive cash flow after the costs but it is hard in our area. So my goal is to not put in any more money down the road for fixes etc. The cash flow needs to be enough to cover those costs. If I have money left, great, but I invest this for the long run. The key to hold it for long is to be able to hold it for a long time without impacting your life. Eventually the equity will be paid off and the price and rent will go up and you will see the benefits. The first 5 years are mostly to break even.
Hope this helps!
BTW, I did this for a 1031 exchange so I had to find a house that was ready. You can buy a fix upper and save some costs upfront as well if there is no time restrictions.
