Rental apartment - what to look for?

[syracusa]

I would appreciate any expert advice regarding a financial move we would like to make soon.

We have about 60-70,000 dollars that we would like to invest in something that would bring the highest yield possible. We both work full-time jobs but mine is rather flexible so there is some room for a small extra occupation on the side.

We examined various options and concluded that a rental is the way to go.
Yes, we are aware this would involve some hassle as opposed to putting the money in some kind of other financial instrument and forgetting all about it. But at this point, we need the highest cash flow possible from this money.

This would be our first rental so we would like to buy it money down.
So there would be no mortgage involved. I would like to do a mortgage for another future rental (I say house, husband says another apartment) - but that will be a while.

For now, we just want to get a first rental, paid off, no mortgage and just start to rent it out.

We are at the stage where we need to get a real estate agent to find some good options for us. We are not even sure where to start and find a good agent.

In terms of the property itself, what are the kind of factors we should keep in mind? We have an idea, but would appreciate any specific advice - such as don't get an apartment in this type of area because a, b, or c. Or don't get one with an electric stove because a, b or c.

Any kind of advice would be greatly appreciated.

Thank you so much!

[97guns]

I'm not a proponent of apartments, condos or town homes because of the monthly association fees. For purely an investment property maybe look into a duplex, even if you have to take a mortgage you may still come out with more cash flow than an apt because of 2x rents, as with any RE investment run your numbers. Your known monthly expenses are property tax, insurance and property manager if you need one. If going the apt route then the association fee will cut into monthly profit. Don't be afraid to mortgage, all mortgage interest is tax deductible.

[syracusa]

Thank you, 97guns for confirming the leverage approach.

I don't know much at all about investing because we haven't really been in this position until recently. We have just been doing the 2 careers thing, retirement investment through work and cutting back on as many unnecessary expenses as we could - with the understanding that "unnecessary" is a highly subjective word.

This way, some extra money piled up and now it bothers me to see it sitting in savings and being paid a monthly nothing for it.

I did some more reading and I learned two things today which I wasn't entirely aware of:

1. Apparently, with real estate investment it is best to leverage, otherwise it's not worth it.

2. I should not buy a rental on our name but open a ltd company for liability purposes.

At first I didn't want to hear about mortgage for investment purposes because years ago during the Recession we ended up with a short sale of our own home (bad times due to husband being laid off) and lost some money; but things have turned around for us financially since then.

We still have a mortgage on our home today but we can easily afford it and our careers have became quite secure (particularly mine - which I would have to try really hard to lose). No other debt.

Then again - debt is debt even when it's a home mortgage and I found it tempting for a while to just work towards paying off the mortgage and that's that; but we have a really good interest rate and we are not necessarily in a hurry.
Plus for investments, I think the time factor is important too...so I don't want to wait until we are 100% debt free to invest.

Then I also read and heard more about the principle of "using other people's money" to build something over the longer term - so I am starting to think why not?

We have considered taking out a 60,000 mortgage or so to finance a better property which we could be left with over a few years of trying to pay off this debt.

I did suggest a house but husband seems to think houses are a pain - too many things can go wrong, too much risk, etc.
I tend to disagree but he prefers an apartment.

I'll suggest the duplex.

Any other pro-house arguments to support my position with him? :-)

Also, what is the best way to find a really good investment real estate agent?

Thanks again, guns. (Do you have 97 ? :-) ).

[97guns]

Thank you, 97guns for confirming the leverage approach.

I don't know much at all about investing because we haven't really been in this position until recently. We have just been doing the 2 careers thing, retirement investment through work and cutting back on as many unnecessary expenses as we could - with the understanding that "unnecessary" is a highly subjective word.

This way, some extra money piled up and now it bothers me to see it sitting in savings and being paid a monthly nothing for it.

I did some more reading and I learned two things today which I wasn't entirely aware of:

1. Apparently, with real estate investment it is best to leverage, otherwise it's not worth it.

2. I should not buy a rental on our name but open a ltd company for liability purposes.

At first I didn't want to hear about mortgage for investment purposes because years ago during the Recession we ended up with a short sale of our own home (bad times due to husband being laid off) and lost some money; but things have turned around for us financially since then.

We still have a mortgage on our home today but we can easily afford it and our careers have became quite secure (particularly mine - which I would have to try really hard to lose). No other debt.

Then again - debt is debt even when it's a home mortgage and I found it tempting for a while to just work towards paying off the mortgage and that's that; but we have a really good interest rate and we are not necessarily in a hurry.
Plus for investments, I think the time factor is important too...so I don't want to wait until we are 100% debt free to invest.

Then I also read and heard more about the principle of "using other people's money" to build something over the longer term - so I am starting to think why not?

We have considered taking out a 60,000 mortgage or so to finance a better property which we could be left with over a few years of trying to pay off this debt.

I did suggest a house but husband seems to think houses are a pain - too many things can go wrong, too much risk, etc.
I tend to disagree but he prefers an apartment.

I'll suggest the duplex.

Any other pro-house arguments to support my position with him? :-)

Also, what is the best way to find a really good investment real estate agent?

Thanks again, guns. (Do you have 97 ? :-) ).

With a house you get a big depreciation deduction, I'm not sure about an apt. I have targeted apts myself in my early stages of RE research and investing and was considering buying some, the numbers were good and like you that's all I was after was some yield on my money. If you run numbers which you absolutely should , you will see that your yield Is better with a mortgage/leverage property with minimal down, with your $60-70k you could possibly get into 2 or 3 properties

I would only suggest buying as new as you can afford to minimize repairs, you buy a 30 or 40 year old home and it could need a roof before you recoup your investment.

I had 97 guns and have taken some profits off the table

[~bs]

it depends on the price of the property and the split between land and building. with a condo, the depreciation may be more than a single family house since proportionally, the value of the land split 100 ways is going to be much less than the value of the unit. And land is not depreciated.

Say a condo is $100k, the land maybe 10k, so 90k is getting depreciated over 27.5 years or whatever. With a house, the values may be more even, like 60-40. All depends

generally, if you have a brand new mortgage, depreciation will kill off most or all of your taxable income on the rental, which is a good thing.