Hi…I am in a disagreement with my mentor. I got opinions from a broker I know, but now I wanted to get some opinions from you guys, if you would:
Recently remodeled brick ranch. 3 BR/2 Full baths. Everything updated in compliance with city & sec 8 codes. New kitchen with new appliances. Full basemnt. New digital control central air & forced heat/duct system. Electrical completely re-wired and re-piped; new outlets, switches and all new interior/exterior light fixtures. Reconstructed 2-car garage w/remote. All new flooring. Enclosed porches front and back with new flooring. Finished front & back porches. Both baths updated. Most windows replaced, existing windows scraped and painted. Newly sodded backyard. Roof is 5 yrs old. Newer 6’ treated fence. Most of the new parts are still warranteed. House appraised for 130k. Purchase price $114k with no money down/seller assist. Vacant.
It is in a beautiful neighborhood in a great suburb, near businesses and restaurants, 5 minutes from a major shopping mall, 5 minutes from some of the cheapest gas in America, near public transportation, 10 minutes from where I live, down the street from my dentist as a (random) matter of fact.
I think this would be a good first rental property for me. I earn enough in my full-time job and part-time business to cover the holding costs which would be just under about $1200 including debt service until I can get a renter in there. That includes average monthly utilities, which would of course be a bit lower while the place was vacant. Other 3/2 houses in the neighboring blocks rent for $1300-$1400, so once rented I’m only looking at $100-$200 a month cash flow. Some of the 3/2 houses have the tenants paying their own utils in which case I’d be looking at about $400 a month cash flow.
I normally look to my mentor for this kind of advice because he knows tons, but this is where he and I part ways. He doesn’t like this situation because he says (as he always says), “this kind of cash flow won’t even pay my bar tab.” I don’t know about yall, but in my town I can get many shots of Malibu for $200. And I can live like a friggin queen on $.50 wing night! :o
I am not trying to make real money off the cash flow of one house. I don’t want to lose money either, but my purpose is to start trying to build up my portfolio instead of only birddogging or wholesaling. Yes I know that there isn’t much equity in the house either, but at least it is not upside down and I have a little wiggle room. Also, I wanted to get some experience landlording one tenant before I picked up a few more houses and eventually get some multi-units. I have a whole business plan but this post is so long as it is, I won’t put it here but I do have one complete with a couple of alternate strategies for this one house and the business overall.
So what are your thoughts on this? Please don’t let this turn into a debate over whether or not to rent to section 8. I know this board is split on this. In fact, for the sake of this discussion, let’s assume I find the most reliable tenants in the universe.
Thanks in advance. Good night…d