I’ve been searching the net for something with little or no negative. I found this site with new homes listed on the Big Island of Hawaii. Prices are from $199,000 and up:
They have a bunch of new homes, and many priced below $250,000. I studied thd rental ads in the local newspaper (on-line http://www.hawaiitribune-herald.com/ ), and it looks like I can get into one of these homes with 10% down, and the rent will cover the mortgage on the smaller homes. Some also have attached\detached studios that can also be used as a rental unit, so the larger houses have two streams of income.
I also called the County Housing Office, and it sounds like they have a great deal of Section 8 renters, and the county pays the rent directly to the owner.
I called these guys, and they suggested I contact their “preferred” lender, and they offered to pay some or all of my loan costs. They evidently are the builders, and will also provide property management for a year, and they have a one year warranty where they will take care of any maintenance issues.
The lender is very nice, and has products from all the major lenders, but I was warned that the mortgage products are changing daily due to the current mortgage environment.
I’ve got a great credit score, and these houses sound like what I was looking for. Does anyone have some advise/recommendations about what I may be missing, if this is something worth getting into, and if there is additional research I should be doing?
Rent that covers mortgage and cash flow are 2 different things. You are wanting to purchase at just about retail and rent out. This spells negative cash flow in a hurry.
You should be looking at rent covering 1.5 times your payment to cover all expenses.
Also, make sure that you are zoned properly to be able to rent out the attached studios. Otherwise, the extra apartment will be illegal.
Operating rental properties is ALL ABOUT THE NUMBERS. Buying a rental that “covers the mortgage” is an invitation to disaster. That is guaranteed to result in a negative cash flow. THIS IS A HORRIBLE DEAL! Keep in mind that the purpose of operating rentals is to make money. Buying at retail and losing money each month is NOT a good strategy.
The reason that a house is a good deal is because it is distressed. Distress can be caused by death disease, divorce, job loss or whatever. You make your money when you relieve that distress. Brand new houses are rarely distressed so they are rarely a deal.
Well, I’ve done my homework, and obtained copies of permits, and have made an offer on house with two rental units (main house, and a detached studio).
The house I’ll purchase is already set up for Section 8 housing, and has two approved tenants. The rents will cover my mortgage, and a little extra to spare.
The rent is paid directly from the County, and the builder had already collected the security deposits, which will be transferred to me as the landlord.
All in all, I’m happy with the deal, and I can travel to Hawaii and deduct the expense to boot.
Thanks to all for the insight, I did some extra homework thanks to you all, and am very comfortable with this deal.
I’m almost positive the house you are talking about was probably bought at retail and has a negative cash flow. Especially when you said “with a little to spare,” it makes me think that you believe you subtract the mortgage from the rent and the rest is money in your pocket. Also, you being an out of town land lord makes the whole situation even worse.