Quote:
Originally Posted by secretlyrich
You are correct though, I did not include property taxes in my estimate, and I did not include 3 months vacancy because the place I'd buy would be in a upscale sought after area with limited housing. I also will include in the rental agreement, that the renter is responsible for the first $250 in repairs, but all the condos I'm looking at are 1 bedroom 600-900 sq ft.
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What if the tenant chooses not to pay the $250 and walks away? Tenents might do that. $250 might be a lot extra for a college student or renter. Why not just charge an extra $20/month and add this $20 to a cash account each month?
Quote:
Originally Posted by secretlyrich
Jim_Ohio:
"In addition, in your case you would lose the 250k you put down."
How would I ever lose the $250K if I own the property outright ? There is no loan.
"Keep in mind if you cannot make a payment the worst case is a property is foreclosed with a ding on your credit score."
Thats why I like the idea of paying for the place completely. No risk of foreclosure ever.
I'm young (just turned 30), so this would be a very aggressive, but if I buy in a very upscale area, that has a steady pool of ppl with money (Ivy League students, etc), I should never have any vacancies and steady cash flow.
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If the properties are paid off, your worst case is that you lose the money you paid for the properties. Hurricane, Tornado, drug dealer living there, your own bankruptcy, property goes down in value, whatever- you need to think worst case. You are liabel for the actions of your tenants and your tenants could TRASH the place to where more than $250k of repairs is needed.
If you have a loan, you are only out the down payment if you walk away. If you pay off the property, you are out everything you put in.
In addition the rental income is taxed as ordinary income come tax time. If you have a loan, you can offset that income with the cost of the mortgage payment/ mortgage interest AND depreciate the property. Most land lords like renting because of the tax advantages of the leverage, not the passive income.
I think you should talk to some landlords. This is not easy money like you think or everyone would be doing it.