Trying to get started

I am trying to get started in Landlording. I have been on this site for about 6 months now trying to soak up everything I can. My wife and I are paying our current house off in attempt to use it as our first rent house. At our current rate it will take us another 4 years to pay it off. I am not trying to rush into this, but I am eager to start in the business. Is there anything else I can do to start Landlording quicker?

The time to buy is NOW, not in 4 years. Paying off your house early is admirable, but is it the smartest thing to do?

If you don’t pay off the house, just rent it, will the rent cover your mortgage payment and expenses?

Shouldn’t you be saving those extra principal payments now for a downpayment on a couple of units? Are you flexible enough to be able to move–or do you have kids, kid’s schools, etc. to think about?

Do you have other debt, credit card or something that would keep you from buying now?

Think about these things and get back to us. You don’t want to be sitting on the bench and have the bus leave without you.


We do not have any debt aside from our house. Our cars are paid off so really the only thing we pay it utilities and mortgage on our house, and the insurance on our vehicles. We only average about 900 dollars a month extra on our house.

I have thought about just saving a down payment and buying my first rent house, but I am worried about the extra mortgage or random repairs killing us when we dont have a tenant in the residence. I very much so want to get off the sidelines. I have talked to one of my realtor friends and he advised I would need 20 percent of the total value of an investment property to get it purchased, so that may take a bit to save up.

I have a 5 month old baby right now, and we are not opposed to moving, but we would like to move into a house that we will stay in for the rest of our lives, not just another medium size house. At this time all options are open, which is why I am looking for a little direction from some veterans.

Also our mortgage is 850 right now, and I would like to rent it for 1000. its a 3 bdrm 2 bath 1400 square foot. I live in a college town in Texas so I dont believe it will be hard to get that(once again I am a rook so I could be wrong). So the rent would cover the mortgage.

You’re going to need to do better when buying an investment property if you want it to stand on its own financially. That $150 in rent over your mortgage payment can be taken away pretty easily with a month or two of vacancy or a few repairs. You don’t necessarily have to have a free and clear house, like FO said, before you start investing. Just be careful to not get in over your head. You have to have the ability to pay for repairs when they come up.
Debt-wise, you’re in a good position now. That should look good for you when you want to apply for a NOO mortgage.

With just a 5-month old baby, you should be very flexible as far as a move, if that is what you want to do.

Good for you, no debt other than your house and utilities.

Do you have savings, or are you just channeling everything into the $900/month extra principal payment on your house?

Does your wife work or is she home with the baby?

Lots of nosy-boots questions here, but we can be a sounding-board and get you to think, okay?

Justin is right, the $150/month extra over the mortgage can be eaten up quickly by repairs or vacancy…but wait, you are only 48 months away from a positive cash flow by having it all paid off.

If you don’t have some money in savings, I would start there before sinking it all to principal.

Yes, you need 20% down on an investment house, but NOT on an owner-occupied property. You can buy college-area units, and live in one of them and fix it up. Just get real educated on what it takes to be a college landlord.

You can buy an ugly, below-market house and earn from your paint and decorating skills. You can buy direct from an owner, you don’t need 20% down in this market.


Thanks guys For the help. We currently have 6100 in savings and she works from home but once the little one gets older she will be back at work. She only pulls in about 750 a month right now but when he gets older and she goes full time she will ba at 2100 or so a month. Her check is all extra because we live off of my check.

Another tip to make extra money–infant child care at home. If you are already caring for 1 infant, you are highly sought after by working parents as you know all about infant care. Adding 1 more daytime infant is very doable. Just don’t take on toddlers and older babies–they are a lot more work. Take care of the little sleepers.

I was able to stay at home with baby # 1 by taking care of others’ babies. Those were some nice, mellow months.


My guess would be you have some decent equity in your house.
Have you thought about selling and moving your family into one unit of a four-plex.
You would easily have that 20% down, and possibly more.

To me $150 more in rent than mortgage=negative cash flow. Taxes, insurance, maintenance, vacancies.
That could be a good deal if its paid off or your looking for a more long-term/equity building strategy.

You sound like you are very financially reponsible on paying things off. The dave ramsey pay off everything strategy probably isn’t the best for real estate.


You’re taking an extraordinarily conservative route to investing. Frankly, that approach is too slow for me, but it is a safe and reliable strategy as your equity position remains high.

That said, here is one rule of thumb for conservative investors that I recommend when starting out.

  1. Focus on property with rents that hover around 1% (or more) of the sale price of the property (It doesn’t make any difference what the retail value is, just the final price).

For example if the rent for the property is $1,500, then stay with the properties that can be purchased for $150,000 (or less).

Here’s an example of a standard deal in this market…

$150,000 sale price (regardless of retail value, but including repairs/rehab)
<$ 30,000> down payment (20%)
$120,000 loan balance (6.5% fixed 30/10 (P.I. $758/mo)

$1,500 gross rent/mo
<$ 600> less expenses (40% including vacancy, self managed)
$ 900 mo. cash flow before debt service
<$ 758> debt service
$ 142 pre-tax cash flow

5.6% pre-tax cash-on-cash return

This is a vanilla deal. The secrets to these deals is buying at a 1% rent/price ratio or higher. Of course the more risk and management you wish to undertake the higher the ratios, returns, and …repairs.

I’ve found the most deals in blue collar, C-grade neighborhoods. (Look for work trucks in the driveways in the evenings.)

Something that was pointed out to me several years ago that I’ve experienced. There is higher crime activity in areas with lots of teenagers. I look for "empty nester, " and “starter home” neighborhoods. If there’s lots of teenagers with a high school nearby …in a C area …it’s an iffy call. :evil

All that said …the cost of the underlying financing makes a HUGE impact on the return, even buying at a 1% rent/price ratio. So, taking advantage of low interest rates today is a VERY smart move.

In four years …it’s a crap shoot if we’ll find interest rates this low still. I’ve heard arguments on both sides of that coin, and I can’t bet that things will stay this good.

Today we’ve got prices that reflect levels not seen since 2001 in some areas, with interest rates not seen since WWII. So, right now looks like the sweet spot. Just saying.

Have fun! :cool

Some good points here, but I would caution anyone against settling a deal where the rent is down around 1% of the total cost of the property. IMO, that’s just too low. Needs to be higher to help insulate you against the bad things that can happen with major repairs, prolonged vacancy, tenant damage, etc.

Sounds like you want a little bit of security. I stopped buying single family homes when I realized they were to high risk. Lose a renter and lose 100% of revenue for that investment.

May I suggest multi family. Eight plexes spread the risk. Lose a tenenat and you only lose 1/8th of the revenue. Less impact. A portion of the positive cash flow from each can be used for repairs while still providing income to you and your family or it can budgeted to future RE investments.

Should you have to go to a bank for financing they will look at the revenue generated verses your personal income.

Each unit can generate as much as a SF home.

Food for thought.